O'Connors Inc Sales Are Collected 70% in the Month of the Sale

question 4

Multiple Choice

O'Connors Inc., a small retail store, had the following results for May. The budgets for June and July are also given.
$\begin{array}{|l|r|r|r|}\hline & \text { May (actual) } & \text { June (budget) } & \text { July (budget) } \\\hline \text { Sales } & \$ 42,000 & \$ 40,000 & \$ 45,000 \\\hline \text { Cost of sales } & \underline{21,000} & \underline{20,000} & \underline{22,500} \\\hline \text { Gross margin } & 21,000 & 20,000 & 22,500 \\\hline \text { Operating expenses } & 20,000 & 20,000 & 20,000 \\\hline \text { Operating income } & \$ 1,000 & \$ 0 & \$ 2,500 \\\hline\end{array}$ Sales are collected 70% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the purchase. The operating expenses are paid in the month of the sale.


-What should be the amount of cash collected during the month of June?

• A) $32,000.
• B) $40,000.
• C) $40,600.
• D) $41,000.

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