Question

Sunland Company reported the following information for 2016: October November December Budgeted sales $1300000 $1200000 $1540000 All sales are on credit. Customer amounts on account are collected 50% in the month of sale and 50% in the following month. How much cash will Sunland receive in November?

Answer 1

Total cash receipts - November = $1250000

Step-by-step explanation:

The credit sales are collected for in such a manner that the 50% amount of this month's sale and the 50% amount of previous month's sales are collected in the correct month. Thus, when calculating the cash receipts for November, we know that the 50% of collections will be for October's sales and the 50% of collections will be from the November's sales.

Cash receipts in November:

From October's sales = 1300000 * 0.5 = $650000

From November's sales = 1200000 * 0.5 = $60000

Total cash receipts - November = 650000 + 600000

Total cash receipts - November = $1250000