Question

acme company has observed its accounts receivable collection pattern to be as follows: 40% in the month of the sale, 45% in the month following the sale, and 13% in the second month following the sale. Sales for the last three months of the year were as follows: October, $300,000; November, $450,000; and December, $625,000. Sales for January are budgeted to be $375,000. What are the budgeted cash collections for January?

Answer 1

To calculate the budgeted cash collections for January, we need to determine the amount of cash expected to be collected in January for the sales made in October, November, and December.

First, let's calculate the cash collections for each month based on the given collection pattern:

- October sales: $300,000 x 40% = $120,000 expected to be collected in October

- November sales: $450,000 x 45% = $202,500 expected to be collected in November

- December sales: $625,000 x 13% = $81,250 expected to be collected in December

Next, we need to consider the cash collections for January. Since the sales for January are budgeted to be $375,000, we can calculate the cash collections for January using the given collection pattern:

- January sales: $375,000 x 40% = $150,000 expected to be collected in January

Therefore, the budgeted cash collections for January are $150,000.

To summarize:

- October sales: $120,000 expected to be collected in October

- November sales: $202,500 expected to be collected in November

- December sales: $81,250 expected to be collected in December

- January sales: $150,000 expected to be collected in January