Funcycle Manufacturing's budget includes the following credit sales for the current year: September, $145,000; October, $136,000; November, $120,000; December, $157,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 50% in the first month after sale, and 35% in the second month after sale. What are the cash collections of credit sales in the month of December?

Question

Quizplus · Accepted Answer

To calculate the cash collections for December, we need to first calculate the total amount of credit sales for each month:

- September: $145,000
- October: $136,000
- November: $120,000
- December: $157,000

Next, we need to calculate the cash collections for each month based on the given payment terms:

- September: 15% of $145,000 = $21,750 (received in September)
- October: 50% of $145,000 + 15% of $136,000 = $72,500 + $20,400 = $92,900 (received in October)
- November: 35% of $145,000 + 50% of $136,000 + 15% of $120,000 = $50,750 + $68,000 + $18,000 = $136,750 (received in November)
- December: 35% of $136,000 + 50% of $120,000 + 15% of $157,000 = $47,600 + $60,000 + $23,550 = $131,150 (received in December)

Therefore, the cash collections for credit sales in the month of December is $131,150, which is option D.

Funcycle Manufacturing's Budget Includes the Following Credit Sales for the Current