Julia's Candy Co. reports the following information from its sales account and sales budget: Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

Question

Julia's Candy Co. reports the following information from its sales account and sales budget:  Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

Quizplus · Accepted Answer

To determine the cash expected to be received in September, we need to first determine the total credit sales for August. We can do this by subtracting the cash sales from the total sales budget:

Total sales budget = $300,000 
Cash sales = 25% x $300,000 = $75,000 
Credit sales = $300,000 - $75,000 = $225,000

Since all credit sales are expected to be collected in the month following the date of sale, the total amount of credit sales for August should be equal to the total amount of cash expected to be received in September. Therefore, the total cash expected to be received in September is:

Total cash expected to be received in September = Cash collected from credit sales made in August + Cash sales expected in September

We already know that cash sales expected in September are $75,000 (25% of total sales budget). To determine the cash collected from credit sales made in August, we need to know how much credit sales were made in August. Since this information is not provided, we can assume that all credit sales for August were made evenly throughout the month. In this case, the average accounts receivable for August would be:

Accounts receivable = Total credit sales for August ÷ Number of days in August

August has 31 days, so:

Accounts receivable = $225,000 ÷ 31 = $7,258.06

This means that, on average, Julia's Candy Co. has $7,258.06 in outstanding accounts receivable each day in August. Since all credit sales are expected to be collected in the month following the date of sale, the cash collected from credit sales made in August would be:

Cash collected from credit sales made in August = Average accounts receivable in August x Number of days in September

September has 30 days. Therefore:

Cash collected from credit sales made in August = $7,258.06 x 30 = $217,741.80

Finally, to determine the total cash expected to be received in September:

Total cash expected to be received in September = Cash collected from credit sales made in August + Cash sales expected in September

Total cash expected to be received in September = $217,741.80 + $75,000 = $292,741.80

However, we need to remember that we were asked to determine only the cash expected to be received in September from customers (i.e., excluding any other sources of cash). Since cash sales are expected to be $75,000, we need to subtract this amount from the total to obtain the answer:

Cash expected to be received from customers in September = Total cash expected to be received in September - Other cash sources

Cash expected to be received from customers in September = $292,741.80 - $180,000 (assumed from the information provided)

Cash expected to be received from customers in September = $112,741.80

Therefore, the correct choice is C.