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Cash Collections Computation

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The sales budget of a company for the fourth quarter of 2009 is as follows:

October November December
Sales $96,000 $72,000 $108,000

Sales are 20% cash, 80% credit.

Cost of goods sold is 70% of total sales.

Desired ending inventory for each month is equal to 25% of cost of goods sold for the following month.

Collections on credit sales are as follows:
50% in the month of sale
30% in the month following sale
15% in the second month following sale
5% uncollectable

October 1 inventory is $16,000

Expected sales for January 2007, are $84,000

Payments foe inventory are 70% in the month following purchase and 30% two months following purchase.

Compute the CASH COLLECTIONS for DECEMBER

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Solution Summary

Cash collections computations are given for December.

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