Star Co. was organized on August 1 of the current year. Projected sales for the next three months are

Star Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows: August $250,000 September 200,000 October 275,000 The company expects to sell 50% of its merchandise for cash. Of the sales on account, 30% are expected to be collected in the month of the sale and the remainder in the following month. Prepare a schedule indicating cash collections for August, September, and October.

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  1. The correct answer for August is $162,500, for September is $217,500 and for October is $248,750.

    Explanation:

    According to the scenario, the computation of the given data are as follows:

                        August               September          October  

    Sales Amount    $250,000              $200,000                $275,000  

    Sales on Credit  $125,000              $100,000                 $137,500  

    Sales on Cash   $125,000              $100,000                 $137,500

    So collection of cash are as follows:      

    Aug.credit sales $37,500               $87,500    

    Sep. credit sales                        $30,000                 $70,000  

    Oct. credit sales                                                   $41,250  

    Total cash    $162,500               $217,500                $248,750

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