Dit sales of $42,000 and $68,000, respectively. The company expects to collect 60% of its credit sales in the month of the sale, 35% in the following month, and 5% is deemed uncollectible. What amount of cash collections from credit sales would the company include in its cash budget for the second month

cash collections from credit sales that the company will include in its cash budget for the second month is $55,500

Explanation:

Second Month Cash Collections will include the following Cash flows:

(1) 60% of the 2nd month`s sales

(2) 35 % of the 1st month`s sales

Therefore cash collections from credit sales :

(1) 60% of the 2nd month`s sales ( $68,000×60%)  = $40,800

(2) 35 % of the 1st month`s sales ( $42,000× 35 %) = $14,700

Total cash collections                                                = $55,500

Amount of cash collections from credit sales would the company include in its cash budget for the second month is $55,500

Explanation:

The amount of cash collections from credit sales in the second month = 60% x credit sales in the second month + 35% x credit sales in the first month.

The company has credit sales in the first and the second month of of $42,000 and $68,000, respectively.

The amount of cash collections from credit sales in the second month = 60% x $68,000 + $42,000 x 35% = $55,500

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