Question

*24) Duffy Corporation has prepared the following sales budget:*

Month Cash Sales Credit Sales
May $16,000 $68,000
June 20,000 80,000
July 18,000 74,000
August 24,000 92,000
September 22,000 76,000

Collections are 40% in the month of sale, 45% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible.

Required:
Prepare a schedule of cash collections for July through September.

Objective 6.A

Answer 1

To prepare a schedule of cash collections for July through September, we need to calculate the cash collections for each month based on the given information. By following the given percentages and information on credit sales, we can determine the total cash collections for each month.

Step-by-step explanation:

To prepare a schedule of cash collections for July through September, we need to calculate the cash collections for each month based on the given information. Let's break it down step-by-step:

1. In July, we need to collect 40% of May's credit sales ($68,000) and 45% of June's credit sales ($80,000), which amounts to $27,200 and $36,000 respectively. So, the total cash collection for July would be $27,200 + $36,000 = $63,200.
2. In August, we need to collect 40% of June's credit sales ($80,000), 45% of July's credit sales ($74,000), and 10% of May's credit sales ($68,000). This amounts to $32,000, $33,300, and $6,800 respectively. So, the total cash collection for August would be $32,000 + $33,300 + $6,800 = $72,100.
3. In September, we need to collect 40% of July's credit sales ($74,000), 45% of August's credit sales ($92,000), and 10% of June's credit sales ($80,000). This amounts to $29,600, $41,400, and $8,000 respectively. So, the total cash collection for September would be $29,600 + $41,400 + $8,000 = $79,000.

Therefore, the schedule of cash collections for July through September would be as follows:

• July: $63,200
• August: $72,100
• September: $79,000