Smithfield Company collects 20% of a month\'s sales in the month of sale, 70% in

Q: Smithfield Company collects 20% of a month's sales in the month of sale, 70% in

Calculation of Cash collections in April Description Amount ($) 20 % of April 's sales : $290,000 * 20% 58,000 70 % of March 's sales : $350,000 * 70 % 245,000 6 % of February's sales : $300,000 * 6 % 18,000 Budgeted Cash collections in April 321,000 (option A)

ID: 2584251 • Letter: S

Question

Smithfield Company collects 20% of a month's sales in the month of sale, 70% in the month

following sale, and 6% in the second month following sale. The remainder is uncollectible.

Budgeted sales for the next four months are:

January February March April

           Budgeted sales…………….        $200,000      $300,000   $350,000    $290,000

            Cash collections in April are budgeted to be:
            A. $321,000
            B.   $245,000
            C.   $323,000

D. $292,000

E. $313,000

Explanation / Answer

Calculation of Cash collections in April

Description Amount ($) 20 % of April 's sales : $290,000 * 20% 58,000 70 % of March 's sales : $350,000 * 70 % 245,000 6 % of February's sales : $300,000 * 6 % 18,000 Budgeted Cash collections in April 321,000 (option A)

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Smithfield Company collects 20% of a month\'s sales in the month of sale, 70% in

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