Super Drive, a computer disk storage and back-up company, uses accrual accounting. The company’s Statement of Financial Position for the year ended November 30 is as follows: Super Drive’s budgeted cash collections for the month of December are A. $208,000 B. $520,000 C. $402,000 D. $462,000
Answer (D) is correct . Collections are expected to be 60% in the month of sale and 40% in the month following the sale. Thus, collections in December consist of the $150,000
Answer (A) is incorrect because The amount of $208,000 equals 40% of December sales. Answer (B) is incorrect because Total sales are not collected in the month of sale. Answer (C) is incorrect because The amount of $402,000 represents only 60% of receivables but 100% of receivables will be collected.