During the first and second months it expects credit 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

Business

Brent Parsons

5 February, 15:11

During the first and second months it expects credit 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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Tyler Pacheco · Answer 1

Answer: $55,000

Explanation:

In the second month, the company should expect to collect 35% of the credit sales from the first month and 60% of the credit sales from the second month as is normally expected.

Calculating this therefore would be,

= (0.35 * 42,000) + (0.6 * 68,000)

= $55,000

$55,000 is the cash collections from credit sales the company would include in its cash budget for the second month.