Thornton,Inc.has budgeted sales for the months of September and October at $300,000 and $270,000,respectively.Monthly sales are 20% credit and 80% cash.Of the credit sales,50% are collected in the month of sale,and 50% are collected in the following month.Calculate cash collections for the month of October.

Question

Quizplus · Accepted Answer

Step 1: Calculate credit sales for September and October
Credit sales for September = $300,000 x 20% = $60,000
Credit sales for October = $270,000 x 20% = $54,000

Step 2: Calculate cash sales for September and October
Cash sales for September = $300,000 x 80% = $240,000
Cash sales for October = $270,000 x 80% = $216,000

Step 3: Calculate cash collections for September
Cash collections for September = Cash sales for September + 50% of credit sales for August
Cash collections for September = $240,000 + ($60,000 x 50%) = $270,000

Step 4: Calculate cash collections for October
Cash collections for October = Cash sales for October + 50% of credit sales for September + 50% of credit sales for October
Cash collections for October = $216,000 + ($60,000 x 50%) + ($54,000 x 50%) = $273,000

Therefore, the best choice is C, $273,000.