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A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: January $440,000 February 296,000 March 620,000

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ahmedgodtrust

Answer:

Month incurred Amount   January   February    March

                               $               $             $              $

January              440,000   264,000    132,000  22,000

February            296,000        -             177,600   88,800

March                 620,000        -                 -           372,000

Total collection                    264,000     309,600  482,800

Explanation:

The total collection for each month are $264,000, $309,600 and $482,800 for January, February and March respectively. Of January sales, 60% is collected in January(60% x $440,000), 30% is collected in February(30% x $440,000) and 30% is collected in March(30% x $440,000). The same pattern applies to February and March budgeted credit sales.

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