The Company Is in the Process of Preparing a Cash

question 52

Multiple Choice

$\begin{array}{lrr}&\text { Cash Sales } & \text { Credit Sales }\\ \text { July } &£ 50,000 &£ 150,000\\ \text { August. } &55,000 & 170,000\\ \text { September } &45,000 &130,000\\ \text { October } &50,000 &145,000\\ \text { November } &60,000 & 200,000\\ \text { December } &80,000 &350,000\\\end{array}$
The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:Collections on credit sales:
$60 \%$ in month of sale
$30 \%$ in month following sale
$10 \%$ in second month following sale
- What is the budgeted accounts receivable balance on December 1

• A)£ 80,000.
• B)£140,000.
• C)£ 94,500.
• D)£131,300.

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Definitions:

Net Sales

Total revenue from sales minus returns, allowances, and discounts, representing the actual sales revenue earned.

Perpetual Inventory System

An accounting system that records inventory transactions in real time, immediately affecting the inventory account with each purchase or sale.

Gross Method

An accounting method for recording purchases of inventory with no immediate recognition of discounts; discounts taken are recorded as income.

Merchandise

Goods that are bought and sold in the course of business, typically in a retail or wholesale setting.