Boone Co.'s sales, based on past experience, are 20% cash and 80% credit. Credit sales are typically collected as follows: 40% in the month of sale, 50% in the month after the sale, and 10% in the second month following month of sale. On December 31, the accounts receivable balance is $64,500, of which $21,000 is from November sales. Total sales for January and February are budgeted to be $107,000 and $127,000, respectively. What are Boone Co.'s budgeted cash receipts for February?
a) $102,130.
b) $120,000.
c) $108,370.
d) $134,880.
e) $116,090.

Total= $113,190

Explanation:

Giving the following information:

Boone Co.'s sales, based on experience, are 20% cash and 80% credit.

Credit sales are typically collected as follows:

40% in the month of sale

50% in the month after the sale

10% in the second month.

Sales:

On account December= 64,500 - 21,000= 43,500

Cash January= 107,000

Cash February= 127,000

We need to calculate the cash collected in February:

Cash collection:

From December= 43,500*0.1= 4,350

From January= (107,000*0.8)*0.5= 42,800

Cash From February= (127,000*0.2)= 25,400

On account February= (127,000*0.8)*0.4= 40,640

Total= $113,190

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