Question

Wright Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $240,000, $300,000, and $420,000, respectively, for September, October, and November. The company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in the month following the sale, and the remainder in the following month. The cash collections in September from accounts receivable are:

a. $%192,000
b. $%168,000
c. $240,000
d. $134,400

Answer 1

The collections in September from accounts receivable will be d. $134400

Step-by-step explanation:

First we need to determine the amount of credit sales for the month of September.

Credit sales = total sales - cash sales

Credit sales- September = 240000 - (240000 * 0.2) = 192000

The credit sales for september will be $192000.

The question states that 70% of credit sales will be collected in the month of sale. So, September's collection from accounts receivables will be:

Collection- September = 192000 * 0.7 = 134400