Benton Company's sales budget shows the following expected total sales: $\begin{array}{lc}
\text { Month } & \text { Sales } \
\text { January } & \$ 25,000 \
\text { February } & \$ 30,000 \
\text { March } & \$ 35,000 \
\text { April } & \$ 40,000
\end{array}$ The company expects 80% of its sales to be on account (credit sales).Credit sales are collected as follows: 25% in the month of sale and 72% in the month following the sale,with the remainder being uncollectible and written off.The total cash receipts during April would be:
A) $16,000.
B) $28,160.
C) $24,640.
D) $36,160.

Question

Quizplus · Accepted Answer

The total cash receipts during April include 25% of April's credit sales, 72% of March's credit sales, and none of February's credit sales since they would have been collected in March. April's credit sales are 80% of $40,000 = $32,000. 25% of April's credit sales = $32,000 * 25% = $8,000. March's credit sales are 80% of $35,000 = $28,000. 72% of March's credit sales = $28,000 * 72% = $20,160. Total cash receipts in April = $8,000 (from April's sales) + $20,160 (from March's sales) = $28,160. The correct calculation should be: April's credit sales (25%) = $8,000. March's credit sales (72%) = $20,160. February's credit sales (72%) = $30,000 * 80% * 72% = $17,280. Total = $8,000 + $20,160 + $17,280 = $45,440. However, given the options provided, it seems there was a mistake in my explanation. Re-evaluating the options and the calculation process: April's collections include 25% of April's credit sales and 72% of March's credit sales. Correctly: 25% of April's credit sales ($32,000) = $8,000. 72% of March's credit sales ($28,000) = $20,160. Adding these gives $28,160, which matches option B, not D as initially stated. The correct answer should be based on the calculation of credit sales collections within the given month and the error in the initial explanation regarding the inclusion of February's collections in April, which contradicts the provided collection schedule. The correct answer, based on the provided options and the correct interpretation of the collection schedule, should be reconsidered.

Benton Company's Sales Budget Shows the Following Expected Total Sales