Question

Justin Company's budget includes the following credit sales for the current year: September, $27,000; October, $38,000; November, $32,000; December, $34,000. Credit sales are collected as follows: 10% in the month of sale, 65% in the first month after sale, 23% in the second month after sale, and 2% is uncollectible. How much cash can Justin expect to collect in November as a result of current and past credit sales

Answer 1

Total Cash to collect in November is $34,110.

Step-by-step explanation:

To determine how much cash can Justin expect to collect in November, we prepare a Trade Receivables Budget.

Trade Receivables Budget

September October November

Balance b/d $0 $24,300 $40,950

Credit Sales $27,000 $38,000 $32,000

Cash Received - 10% ($2,700) ($3,800) ($3,200)

Cash Received - 65% $0 ($17,550) ($24,700)

Cash Received - 23% $0 $0 ($6,210)

Balance c/d $24,300 $40,950 $38,840

Therefore,

Total Cash to collect in November is $34,110 ($3,200 + $24,700 + $6,210).