Question

Sioux Corporation is estimating the following sales for the first four months of next year: Sales are normally collected 60% in the month of sale, 35% in the month following the sale, and the remaining 5% being uncollectible. Based on this information, how much cash should Sioux expect to collect during the month of April

Answer 1

$286,500

Step-by-step explanation:

Given that,

Sales in January = $260,000

Sales in February = $230,000

Sales in March = $270,000

Sales in April = $320,000

60% are collected in the same month as the sale

35% in the month following the sale

5% are not collected.

Therefore, the cash received during the month of April includes the 60% of the sales in the month of April and the 35% of the sales in the month of March.

Hence, the amount of cash collected during the month of April:

= 60% of the sales in the month of April + 35% of the sales in the month of March

= (0.6 × $320,000) + (0.35 × $270,000)

= $192,000 + $94,500

= $286,500