Boone Co.'s sales are 20% for cash and 80% on credit.Credit sales are collected as follows: 40% in the month of sale,50% in the month after the sale,and 10% in the second month.On December 31,the accounts receivable balance is $54,000,of which $12,000 is from November sales.Total sales for January and February are budgeted to be $100,000 and $120,000,respectively.
What are the budgeted cash receipts for February?

Question

Quizplus · Accepted Answer

First, we need to calculate the portion of credit sales that will be collected in February:

- November sales: $12,000 x 10% = $1,200 (collected in February)
- December sales: $100,000 x 80% = $80,000 x 50% = $40,000 (collected in January)
- January sales: $100,000 x 80% = $80,000 x 40% = $32,000 (collected in January)
- February sales: $120,000 x 80% = $96,000 x 40% = $38,400 (collected in February)

Total cash receipts for February: $1,200 + $38,400 = $39,600

However, we also need to consider the cash receipts from the accounts receivable balance on December 31:

- From November sales: $12,000 x 50% = $6,000 (collected in January)
- From December sales: $88,000 x 10% = $8,800 (collected in February)

Total cash receipts from accounts receivable: $6,000 + $8,800 = $14,800

Therefore, the total budgeted cash receipts for February are: $39,600 + $14,800 = $54,400, which is closest to answer choice D ($109,400).

Boone Co'S Sales Are 20% for Cash and 80% on Credit