The company is in the process of preparing a cash budget and must determine the

Question

  

  

The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:

  

  

Assume that the accounts receivable balance on July 1 was $65,000. Of this amount, $47,000 represented uncollected June sales and $18,000 represented uncollected May sales. Given these data, the total cash collected during July would be:

Mitchell Company had the following budgeted sales for the last half of last year: Mitchell Company had the following budgeted sales for the last half of last year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Assume that the accounts receivable balance on July 1 was $65,000. Of this amount, $47,000 represented uncollected June sales and $18,000 represented uncollected May sales. Given these data, the total cash collected during July would be:

Explanation / Answer

Hi,

Please find the answer as follows:

Cash Collected in July

Cash Sales = 70000

Credit Sales (July) Collected in July Itself = 170000*.50 = 85000

Credit Sales (June) Collected in July

Total Credit Sales (June) = 47000/.50 = 94000 (since 50% must have been collected in the month of June)

Credit Sales (June) Collected in July = 94000*.40 = 37600

Credit Sales (May) Collected in July = 18000

Total Cash Collected in July = 70000 + 85000 + 37600 + 18000 = 210600

Answer is 210600.

Thanks.

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