Question

Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $40,000 and $73,000, respectively. The company expects to collect 30% of its credit sales in the month of the sale and the remaining 70% in the following month. What is the expected cash collections from credit sales during the first month?

Multiple Choice
$12,000
$28,000
$22,000
$49,000

Answer 1

Option A is the correct answer: $12,000

Step-by-step explanation:

To determine which of these is the correct answer, we need to consider the given information about the expected credit sales for the first and second months. The expected cash collections from credit sales during the first month should be equal to 30% of the credit sales expected for that month, which is $40,000. Therefore, the correct answer is: $12,000