Question

Budgeted sales at Ikkeep Corporation over the next four months are given below:

September	$150,000
October	$160,000
November	$180,000
December	$140,000

The company estimates that 25% of the sales are for cash, and 75% on credit. Collections for sales on account follow a stable pattern as follows:

50% will be collected in the month of the sale, 30% in the month following the sale, 15% in the second month following the sale, and the rest uncollectible. What would be the expected cash receipts for December?

1)

$94,500

2)

$146,000

3)

$361,000

4)

$197,000

Answer 1

For december, the receipts = 50% of current credit sales + 30% of november credit sales + 15% of oct credit sales

first step credit sales and cash sales are calculated using the given percentages.

second step create a budget as follows for break up of receipts

If you have any doubts leave a comment and let me know