Asked by Emily Fritsch on Jul 07, 2024
Verified
Justin Company's budget includes the following credit sales for the current year: September,$25,000; October,$36,000; November,$30,000; December,$32,000.Credit sales are collected as follows: 15% in the month of sale,60% in the first month after sale,20% in the second month after sale,and 5% is uncollectible.How much cash can Justin expect to collect in November as a result of current and past credit sales?
A) $19,700.
B) $28,500.
C) $30,000.
D) $31,100.
E) $33,900.
Uncollectible
Refers to accounts receivable that a company considers to be uncollectible from debtors and is likely to be written off as a bad debt expense.
Credit Sales
Sales where the payment is not received at the time of sale but is promised to be paid at a later date.
Cash Expected
The amount of money a business anticipates receiving over a specified period, often used in budgeting and planning.
- Understand cash budget preparation and managing minimum cash balances.
Verified Answer
NI
Nimra IshtiaqJul 09, 2024
Final Answer :
D
Explanation :
In November, Justin Company can expect to collect cash from sales made in September, October, and November. The collections are based on the given percentages for the month of sale, the first month after sale, and the second month after sale. - From September sales ($25,000), 20% is collected in November: $25,000 * 20% = $5,000.- From October sales ($36,000), 60% is collected in November: $36,000 * 60% = $21,600.- From November sales ($30,000), 15% is collected in November: $30,000 * 15% = $4,500.Adding these amounts gives the total cash collections in November: $5,000 + $21,600 + $4,500 = $31,100.
Learning Objectives
- Understand cash budget preparation and managing minimum cash balances.