The Model Company is to begin operations in April.It has budgeted April sales of $30,000,May sales of $34,000,June sales of $40,000,July sales of $42,000,and August sales of $38,000.Note that 10% of each month's sales will represent cash sales;75% of the balance will be collected in the month following the sale,17% the second month,6% the third month,and the balance is bad debts.What is the amount of cash to be collected in the month of August?

Question

Quizplus · Accepted Answer

The amount of cash to be collected in the month of August is $40,106. This is calculated as follows:Cash sales in August = 10% of $38,000 = $3,800Credit sales in August = $38,000 - $3,800 = $34,200Cash collected in August from July sales = 75% of $42,000 = $31,500Cash collected in August from June sales = 17% of $40,000 = $6,800Cash collected in August from May sales = 6% of $34,000 = $2,040Total cash to be collected in August = $3,800 + $31,500 + $6,800 + $2,040 = $40,106

The Model Company Is to Begin Operations in April