Nuthatch Corporation began its operations on September 1 of the current year. Bu

Question

Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business—September, October, and November—are $235,000, $309,000, and $421,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.

The cash collections expected in September from accounts receivable are estimated to be

$282,000

$131,600

$235,000

$164,500

Explanation / Answer

Cash collections expected in September from accounts receivable is $131,600

As 30 percent of sales is cash sale. So account receivable is 70% and out of that 70% receivable 80% is collected in september.

So correct answer is B.

Schedule of expected Cash collections Month Particulars September Cash Sales (235,000*30%) 70,500 Credit sales collected in September (235,000*70%*80%) 131,600 Total collections 202,100

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