Budgeted sales in Washburn Company over the next four months are given below:
$$\begin{array} { | l | l | l | l | l | }
\hline & \text { September } & \text { October } & \text { November } & \text { December } \
\text { Budgeted } & \$ 100,000 & \$ 160,000 & \$ 180,000 & \$ 120,000 \
\text { sales } & & & & \
\hline
\end{array}$$ Twenty-five percent of the company's sales are for cash and 75% are on account.Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale,30% are collected in the month following sale,and 15% are collected in the second month following sale.The remainder is uncollectible.Given these data,cash collections for December should be:

Question

Budgeted sales in Washburn Company over the next four months are given below:
$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { September } & \text { October } & \text { November } & \text { December } \
\text { Budgeted } & \$ 100,000 & \$ 160,000 & \$ 180,000 & \$ 120,000 \
\text { sales } & & & & \
\hline
\end{array}$$ Twenty-five percent of the company's sales are for cash and 75% are on account.Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale,30% are collected in the month following sale,and 15% are collected in the second month following sale.The remainder is uncollectible.Given these data,cash collections for December should be:

Quizplus · Accepted Answer

To calculate cash collections for December, we first need to calculate credit sales for each month using the budgeted sales data:
September credit sales = 0.75 * $90,000 = $67,500
October credit sales = 0.75 * $120,000 = $90,000
November credit sales = 0.75 * $150,000 = $112,500
December credit sales = 0.75 * $180,000 = $135,000
Next, we can calculate the collections for each month based on the payment pattern:
September collections = 50% * $67,500 = $33,750
October collections = 30% * $67,500 + 50% * $90,000 = $45,750
November collections = 15% * $67,500 + 30% * $90,000 + 50% * $112,500 = $70,125
December collections = 15% * $90,000 + 30% * $112,500 + 50% * $135,000 = $133,500
Therefore, the answer is B) $133,500.

Budgeted Sales in Washburn Company Over the Next Four Months