Calculator Tara Company\'s budget shows the following credit sales for the curre

Question

Calculator Tara Company's budget shows the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for credit sales is received 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 will Tara Company expect to collect in November as a result of current and past credit sales? a. $28,400 b. $30,000 c. $31,100 d. $19,700

Explanation / Answer

Cash collections in November=(0.15*November)+(0.6*October)+(0.2*September)

=(0.15*30,000)+(0.6*36000)+(0.2*25000)

which is equal to

=$31100(C).

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