Question

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 $248,000, $316,000, and $424,000, 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.$142,240

b.$254,016

c.$211,680

d.$176,960

Answer 1

Answer = c.$211,680

Note:

1. The cash collections expected in October from accounts receivable are estimated to be = 80% * Credit Sales of October + 20 % * Credit Sales of September

= 80%*221200+20%*173600

= $ 211,680

2.

	September	October
Sales	2,48,000	3,16,000
Cash Sales ( 30%)	74,400	94,800
Credit Sales (70%)	1,73,600	2,21,200
Receipts of Credit Sales:	September	October
1. 80% in month of sale	1,38,880	1,76,960
2. 20% in the month following the sale		34,720