Question

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: January $440,000 February 296,000 March 620,000

Answer 1

Month incurred Amount January February March

$ $ $ $

January 440,000 264,000 132,000 22,000

February 296,000 - 177,600 88,800

March 620,000 - - 372,000

Total collection 264,000 309,600 482,800

Step-by-step explanation:

The total collection for each month are $264,000, $309,600 and $482,800 for January, February and March respectively. Of January sales, 60% is collected in January(60% x $440,000), 30% is collected in February(30% x $440,000) and 30% is collected in March(30% x $440,000). The same pattern applies to February and March budgeted credit sales.