Question

The Task Company is to begin operations in April. It has budgeted April sales of $30,000, May sales of $34,000, June sales of $40,000, July sales of $42,000, and August sales of $38,000. Note that 10% of each month's sales will represent cash sales; 75% of the balance will be collected in the month following the sale, 17% the second month, 6% the third month, and the balance is bad debts. What is the amount of cash to be collected in the month of July?

Answer 1

July collection = $41,780

Step-by-step explanation:

Sales in the month of July = $42,000

Given,

10% of each month's sales will represent cash sales

75% of the balance will be collected in the month following the sale

17% the second month

6% the third month

Therefore, we also need the sales amount of April, May, and June because the collection continues up to 4th month.

Therefore, Task company will collect total cash in the month of July =

6% from the sale of April = $30,000*6% = $ 1,800

17% from the sale of May = $34,000*17% = $ 5,780

75% from the sale of June = $40,000*75% = $30,000

10% from the sale of July = $42,000*10% = $ 4,200

$ 41,780