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8 June, 06:01

Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business September, October, and November are $250,000, $311,000, and $407,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale. The cash collections expected in October from accounts receivable are estimated to be a.$174,160 b.$139,160 c.$209,160 d.$250,992

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  1. 8 June, 06:18
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    c.$209,160

    Explanation:

    Given that the cash received from each sale will be collected over 2 months. If 30% of mechanize is to be sold for cash, then 70% will be sold on account. Further more, 80% of the credit/sale on account will be collected in the month of sale and 20% in the following month.

    Hence for October, cash collection will include 20% of credit sale from September and 80% of the credit sale in the month.

    Given that sales in September is $250,000

    Amount expected to sold on account

    = $250,000 - (30% * $250,000)

    = $175,000

    Amount expected to be collected from this sale in October

    = 20% * $175,000

    = $35,000

    Amount of credit sale in October

    = $311,000 - (30% * $311,000)

    = $217,700

    Amount of this credit sale to be collected in October

    = 80% * $217,700

    = $174,160

    Total collected from accounts receivable in October

    = $174,160 + $35,000

    = $209,160
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