Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business-September, October, and November-are $260,000, $375,000, and $400,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.
The cash collections expected in October from accounts receivable are estimated to be
A) $246,400
B) $262,500
C) $210,000
D) $294,500

Question

Quizplus · Accepted Answer

October sales are $375,000. Of this amount, 30% or $112,500 is expected to be collected in cash. Of the remaining $262,500 in sales on account, 80% or $210,000 is expected to be collected in October and the remaining 20% or $52,500 is expected to be collected in November. Therefore, the total cash collections expected in October are $112,500 + $210,000 = $322,500.

Nuthatch Corporation Began Its Operations on September 1 of the Current