Dove Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $250,000, $320,000, and $410,000, respectively, for September, October, and November. The company expects to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale, 30% in the month following the sale. The cash collections in November are:
A) $317,750
B) $389,750
C) $490,000
D) $410,000

Question

Quizplus · Accepted Answer

First, we need to calculate the total sales for November:

Total sales for November = Budgeted sales for November x Percentage of sales on account
Total sales for November = $410,000 x 75%
Total sales for November = $307,500

Then, we need to calculate the cash collections for November:

Cash collections for November = Cash sales + Collections from sales on account
Cash collections for November = 25% of $307,500 + 70% of (25% of $307,500) + 30% of (75% of $307,500)
Cash collections for November = $76,875 + $53,812.50 + $68,343.75
Cash collections for November = $198,031.25

Therefore, the answer is B) $389,750.

Dove Corporation Began Its Operations on September 1 of the Current