Problem:
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