Question

Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company: January February March April Total sales $50,000 $60,000 $40,000 $30,000 What is the amount of cash that should be collected in March

Answer 1

The amount of cash collected in March should be:

$51,000.

Step-by-step explanation:

a) Data and Calculations:

Budgeted sales and Cash Collections:

January February March April

Total sales $50,000 $60,000 $40,000 $30,000

Collections:

35% month of sales 17,500 21,000 14,000 10,500

45% month following 22,500 27,000 18,000

20% second month 10,000

Total collections in March $51,000

b) The above calculations concentrated on the month of March, being the month of interest. Though, sales on account totals $40,000, the cash collections for the month amounts to $51,000. This arises from cash collections from the months of January and February.