The sales budget for Joy Time Toys for the first three months of the year is expected to be $50 000, $40 000 and $60 000 with 30% of each month's sales being on credit. Collections of accounts receivable are scheduled at 40% during the month of sale, 55% 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

Sales in the second month are budgeted to be $40 000 with 30% or $12 000 being on credit. 
Collections during the month of sale: 40% of $12 000 = $4 800 
Collections during the month following the sale: 55% of $12 000 = $6 600 
Uncollectible accounts: 5% of $12 000 = $600 
Total cash receipts from sales for the second month: $4 800 + $6 600 - $600 = $10 800 
Adding cash collections from credit sales from previous month: $40 000 - 30% x $40 000 = $28 000 
Total budgeted cash receipts from sales for second month: $10 800 + $28 000 = $38 800 
Rounding to nearest $50: $38 800 ≈ $38 000.

The Sales Budget for Joy Time Toys for the First