dit sales of $42,000 and $68,000, respectively. The company expects to collect 60% of its credit sales in the month of the sale, 35% in the following month, and 5% is deemed uncollectible. What amount of cash collections from credit sales would the company include in its cash budget for the second month

Question

Myles Donovan

Business

12 May, 07:30

dit sales of $42,000 and $68,000, respectively. The company expects to collect 60% of its credit sales in the month of the sale, 35% in the following month, and 5% is deemed uncollectible. What amount of cash collections from credit sales would the company include in its cash budget for the second month

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Answers (2)

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Julien Shields · Answer 1

cash collections from credit sales that the company will include in its cash budget for the second month is $55,500

Explanation:

Second Month Cash Collections will include the following Cash flows:

(1) 60% of the 2nd month's sales

(2) 35 % of the 1st month's sales

Therefore cash collections from credit sales:

(1) 60% of the 2nd month's sales ($68,000*60%) = $40,800

(2) 35 % of the 1st month's sales ($42,000 * 35 %) = $14,700

Total cash collections = $55,500

Anabel Davies · Answer 2

Amount of cash collections from credit sales would the company include in its cash budget for the second month is $55,500

Explanation:

The amount of cash collections from credit sales in the second month = 60% x credit sales in the second month + 35% x credit sales in the first month.

The company has credit sales in the first and the second month of of $42,000 and $68,000, respectively.

The amount of cash collections from credit sales in the second month = 60% x $68,000 + $42,000 x 35% = $55,500