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Cash collections

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The PDQ Company makes collections on credit sales according to the following schedule:

25% in month of sale
70% in month following sale
4% in second month following sale
1% uncollectible

The following sales have been budgeted:
Month Sales
April $100,000
May $120,000
June $110,000

Cash collections in June would be:

a. $113,400

b. $110,000

c. $111,000

d. $115,500

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The solution explains how to calculate the cash collections.

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