Avril Company makes collections on sales according to the following schedule: 30% collected in the month of sale
60% collected in the month following sale
8% collected in the second month following sale
2% uncollectible
The following sales are expected: $$\begin{array} { | l | l | }
\hline & \text { Expected Sales } \
\hline \text { January } & \$ 100,000 \
\hline \text { February } & 120,000 \
\hline \text { March } & 110,000 \
\hline
\end{array}$$ Cash collections in March should be budgeted to be:
A)$110,800.
B)$110,000.
C)$113,000.
D)$105,000.

Question

Avril Company makes collections on sales according to the following schedule: 30% collected in the month of sale
60% collected in the month following sale
8% collected in the second month following sale
2% uncollectible
The following sales are expected: $$\begin{array} { | l | l | } 
\hline & \text { Expected Sales } \
\hline \text { January } & \$ 100,000 \
\hline \text { February } & 120,000 \
\hline \text { March } & 110,000 \
\hline
\end{array}$$ Cash collections in March should be budgeted to be:
A)$110,800.
B)$110,000.
C)$113,000.
D)$105,000.

Quizplus · Accepted Answer

In March, Avril Company will collect 30% of March sales ($110,000 * 30% = $33,000), 60% of February sales ($120,000 * 60% = $72,000), and 8% of January sales ($100,000 * 8% = $8,000). Total collections in March = $33,000 + $72,000 + $8,000 = $113,000.

Avril Company Makes Collections on Sales According to the Following