Dove Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $249,000, $304,000, and $410,000, respectively, for September, October, and November. The company expects to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale and 30% in the month following the sale. The cash collections in November are a.$215,250 b.$463,380 c.$386,150 d.$102,500

The Cash Collections in the month of November are c. $386,150.

Explanation:

Months                            September             October           November

Sales                                $249,000             $304,000          $410,000

Cash Collected (25%)         62,250                  76,000             102,500

⇒ Sales on Account       $186,750             $228,000         $307,500

Collections of Rec.

Last Month (30%)                                                                         68,400                                              

Current Month (70%)                                                                  215,250

Total Collections                                                                      $386,150

Workings for November:

Last Month Collection = 228,000 * .3 = 68,400

Current Month Collection = 307,500 * .7 = 215,250

Total Collections = 68,300 + 215,250 + 102,500 = $386,150.

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c) $386,150

Explanation:                                                                             $

Cash sales (25%) = 25% × 410,000                             =   102,500

Sales on Account:

70% month of sale = 70% * (100-25)% × $410,000     = 215,250

30% month after sale = 30% × (100-25%) × $304,000 =  68,400

Total cash collection for Nov.                                        386,150

Total cash collection for November:  

=102,500 + 215,250 + 68,400

= $386,150

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