All of Porter Corporation's sales are on account. Fifty percent of the credit sales are collected...

Question:

All of Porter Corporation's sales are on account. Fifty percent of the credit sales are collected in the month of sale, 35% in the month following sale, and 10% in the second month following sale. The remainder are uncollectible. The following are budgeted sales data for the company:

Total sales

January $404,000

February $614,000

March $694,000

April $814,000

Cash receipts in April are expected to be:

a. $407,000.

b. $649,900.

c. $711,300

d. $304,300

Cash collection schedule:

The cash collection schedule is prepared with the help of anticipated (pre-estimated) cash collection trend. The cash to be received during the current period includes the account receivables for the earlier period.

Answer and Explanation:

The correct answer is option (c).

Cash receipts in April are expected to be $711,300.

Explanation: Cash receipts in April are expected to be $711,300 ($614,000 x 10% + $694,000 x 35% + $814,000 x 50%).


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