Dougan Paint and Supply sells exclusively to building contractors on a credit basis. The company collects 75% of its credit sales in the month of sale and the remaining 25% in the month following sale. April's actual sales totaled $32,500 and the sales budget forecasts sales of $55,000 for May and another $60,000 for June. What amount of cash receipts will Dougan budget from May and June sales respectively?
A) $55,000 from May and $60,000 for June.
B) $41,250 from May and $45,000 for June.
C) $13,750 from May and $15,000 for June.
D) $49,375 from May and $58,750 for June.*

Question

Quizplus · Accepted Answer

For May, Dougan will collect 75% of May sales ($55,000 * 75% = $41,250) plus 25% of April sales ($32,500 * 25% = $8,125), totaling $49,375. For June, Dougan will collect 75% of June sales ($60,000 * 75% = $45,000) plus 25% of May sales ($55,000 * 25% = $13,750), totaling $58,750.

Dougan Paint and Supply Sells Exclusively to Building Contractors on a Credit