Question

Budgeted sales in Allen Company over the next four months are given below: September $100,000 Budgeted Sales October $160,000 November $180,000 December $120,000 Twenty-five percent of the company's sales are for cash, and 75% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder is uncollectible. Given these data, what should be cash collections for December? cross out Select one: A. $138,000. B. $133,500 C. $153,000 D. $120,000 cross out cross out cross out

Answer 1

The cash collections for December in Allen Company can be calculated by considering the sales for the previous months and applying the given collection pattern for accounts. In this case, the cash collections for December will amount to $84,000.

The answer is not in the options.

Step-by-step explanation:

To calculate the cash collections for December, we need to consider the sales for November and October as well. Let's break it down step by step:

1. September sales: $100,000 (25% cash sales and 75% on account sales).
2. October sales: $160,000 (25% cash sales and 75% on account sales).
3. November sales: $180,000 (25% cash sales and 75% on account sales).
4. The cash collections for each month will be:

• September sales cash collections: $25,000 (50% of $50,000) + $30,000 (30% of $100,000) + $15,000 (15% of $100,000) = $70,000.
• October sales cash collections: $40,000 (50% of $80,000) + $48,000 (30% of $160,000) + $24,000 (15% of $160,000) = $112,000.
• November sales cash collections: $45,000 (50% of $90,000) + $54,000 (30% of $180,000) + $27,000 (15% of $180,000) = $126,000.

The cash collections for December will be:

• December sales cash collections: $30,000 (50% of $60,000) + $36,000 (30% of $120,000) + $18,000 (15% of $120,000) = $84,000.

Therefore, the cash collections for December will be $84,000.

The answer is not in the options.