The sales budget for Jim's Tents for the first three months of the year is expected to be $150 000, $140 000 and $160 000 with 20% of each month's sales being on credit. Collections of accounts receivable are scheduled at 50% during the month of sale, 45% during the month following the sale with 5% uncollectable. The total budgeted cash receipts from sales for the second month will be:

Question

Quizplus · Accepted Answer

The total sales on credit for the second month are: 
$140,000 x 20% = $28,000

Scheduled collections for sales made in the second month are: 
50% = $70,000 (collected during the month of sale) 
45% = $63,000 (collected during the following month) 
5% uncollectable = $7,000

Total budgeted cash receipts from sales for the second month = $70,000 + $63,000 - $7,000 = $126,000

However, this does not account for any collections from previous months' sales, so we need to adjust for that:

Collections from previous months' sales (45% of sales from the first month) = $63,000 x 45% = $28,350

Total budgeted cash receipts from sales for the second month = $126,000 + $28,350 = $154,350

Therefore, the closest option is B, which is $139,500.

The Sales Budget for Jim's Tents for the First Three