Question

Ruiz Co.’s budget includes the following credit sales for the current year: September, $154,000; October, $145,000; November, $129,000; December, $166,000. Credit sales are collected as follows: 20% in the month of sale, 55% in the first month after sale, and 25% in the second month after sale. How much cash can the company expect to collect in December as a result of current and past credit sales?

Multiple Choice
a.$33,200.
b.$107,200.
c.$104,150.

Answer 1

The company can expect to collect $104,150 in cash in December as a result of current and past credit sales.

Step-by-step explanation:

To determine the cash expected to be collected in December as a result of current and past credit sales, we need to calculate the cash collections for each month and add them up.

In September, the cash collected would be 20% of $154,000, which is $30,800. In October, the cash collected would be 55% of $154,000 (collected in October) and 20% of $145,000 (collected in September), which is $84,700. In November, the cash collected would be 55% of $145,000 (collected in November), 20% of $129,000 (collected in October), and 20% of $154,000 (collected in September), which is $102,900. In December, the cash collected would be 55% of $129,000 (collected in December), 20% of $145,000 (collected in November), and 20% of $129,000 (collected in October), which is $104,150.

Therefore, the company can expect to collect $104,150 in cash in December as a result of current and past credit sales.