Two Brothers Moving prepared the following sales budget:

Month Cash Sales Credit Sales

March $20,000 $10,000

April $36,000 $16,000

May $42,000 $40,000

June $54,000 $48,000

Credit collections are 25% in the month of sale, 60% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible. What are the total cash collections in May at Two Brothers Moving?

A) $62, 600

B) $20, 600

C) $65,000

D) $76, 100

Total cash collection = $62,600

Explanation:

Giving the following information:

Month Cash Sales Credit Sales

March $20,000 $10,000

April $36,000 $16,000

May $42,000 $40,000

Credit collections are 25% in the month of sale, 60% in the month following the sale, and 10% two months following the sale.

Cash collection May:

Sales in cash May = 42,000

Sales on account May = (40,000*0.25) = 10,000

Sales on account April = (16,000*0.6) = 9,600

Sales on account March = (10,000*0.1) = 1,000

Total cash collection = $62,600