A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically, the company'

Question

1 month ago

5

A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically, the company'

s sales are 30% cash. The remaining sales are on credit with the following collection pattern: Collections on Account Percentage In the month of sale 40%
In the month following the sale 58%
Uncollectible 2%
Sales for the first 5 months of the coming year are forecast as follows:

January $3,500,000
February 3,800,000
March 3,600,000
April 4,000,000
May 4,200,000
For the month of April, the total cash receipts from sales and collections on account would be

a. $3,729,968
b. $3,781,600
c. $4,025,200
d. $4,408,000

Business

1 answer:

marusya05 [3.7K] · Answer 1 · 2026-04-07T13:13:01+03:00

Answer:

c. $4,025,200

Explanation:

Below is the breakdown of total cash collection from sales and receivables for April:

= April sales × percentage of cash sales + April sales × percentage of credit sales × proportion of collection month + March sales credit sales percentage × Following month collection

= $4,000,000 ×30% + $4,000,000 × 70% × 40% + $4,200,000 × 70% × 58%

= $1,200,000 + $1,120,000 + $1,705,200

= $4,025,200

Since cash sales account for 30%, therefore the credit sales amount to 70%