The LaPann Company has obtained the following sales forecast data:
$\begin{array} { | l | r | r | r | r | }
\hline & \text { July } & \text { August } & \text { September } & \text { October } \
\hline \text { Cash Sales } & \$ 80,000 & \$ 70,000 & \$ 50,000 & \$ 60,000 \
\hline \text { Credit Sales } & 240,000 & 220,000 & 180,000 & 200,000 \
\hline
\end{array}$
The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.

-What are the budgeted cash receipts for October?
A) $188,000.
B) $226,000.
C) $248,000.
D) $278,000.

Question

The LaPann Company has obtained the following sales forecast data:
$\begin{array} { | l | r | r | r | r | } 
\hline & \text { July } & \text { August } & \text { September } & \text { October } \
\hline \text { Cash Sales } & \$ 80,000 & \$ 70,000 & \$ 50,000 & \$ 60,000 \
\hline \text { Credit Sales } & 240,000 & 220,000 & 180,000 & 200,000 \
\hline
\end{array}$
The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.

-What are the budgeted cash receipts for October?
A) $188,000.
B) $226,000.
C) $248,000.
D) $278,000.

Quizplus · Accepted Answer

For October, the budgeted cash receipts include October's cash sales, plus collections from credit sales made in previous months. October cash sales are $60,000. From credit sales: - 20% of October's credit sales ($200,000 * 20% = $40,000), - 70% of September's credit sales ($180,000 * 70% = $126,000), - 10% of August's credit sales ($220,000 * 10% = $22,000). Total = $60,000 + $40,000 + $126,000 + $22,000 = $248,000.

The LaPann Company Has Obtained the Following Sales Forecast Data