Two Brothers Moving prepared the following sales budget: Credit collections are 25% in the month of sale, 60% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible.
What are the total cash collections in May?

Question

Two Brothers Moving prepared the following sales budget:  Credit collections are 25% in the month of sale, 60% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible.
What are the total cash collections in May?

Quizplus · Accepted Answer

To calculate the cash collections in May, we need to look at the sales made in February (two months prior). From the sales budget, we can see that the sales in February are $100,000. Applying the credit collections percentages, we get:

- 25% of $100,000 = $25,000 in cash collected in February
- 60% of $100,000 = $60,000 in cash collected in March
- 10% of $100,000 = $10,000 in cash collected in April
- 5% of $100,000 = $5,000 is uncollectible

Adding up the cash collected in February, March, and April gives us:

$25,000 + $60,000 + $10,000 = $95,000

Therefore, the total cash collections in May will be $95,000 minus any cash collected for uncollectible accounts, which is zero in this case.

Total Cash Collections in May = $95,000

Therefore, the best choice is (A).

Two Brothers Moving Prepared the Following Sales Budget: Credit