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:
A) $30,000.
B) $82,500.
C) $112,500.
D) $120,000.
E) $202,500.

Question

Quizplus · Accepted Answer

To find the total amount of cash expected to be received from customers in September, we need to first find the total credit sales for September. We can do this using the sales budget. Let's assume the total sales for September are $400,000. If 25% of sales are cash sales, then the remaining 75% are credit sales, which equals $300,000. Since all credit sales are expected to be collected in the month following the date of sale, we expect to collect $300,000 in October.

Therefore, the total amount of cash expected to be received from customers in September is the amount of cash sales for September plus any credit sales from the previous month that are expected to be collected in September. Since we don't have information on credit sales from August, we can assume that all credit sales from August have already been collected in September. This means that the total amount of cash expected to be received in September is simply 25% of total sales ($100,000). However, we also need to add in any cash received from credit sales in September that were collected earlier than expected. Since we don't have information on early collections, we can assume this amount is negligible.

Therefore, the total amount of cash expected to be received from customers in September is $100,000, or 25% of total sales.