Question

Memphis Company anticipates total sales for April, May, and June of $1,000,000, $1,100,000, and $1,150,000 respectively....

Memphis Company anticipates total sales for April, May, and June of $1,000,000, $1,100,000, and $1,150,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 40% are collected in the same month as the sale, 55% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of May.

I know the answer is $742,500 but not sure how they came up with that?

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Answer:-

Memphis Company
cash collection from debtors
Particulars April May June
$ $ $
Total sales 1000000 1100000 1150000
Cash sales 25% 250000 275000 287500
Credit sales 75% 750000 825000 862500
Collection from debtors
40% collected the first month of sale 750000*40%=300000 825000*40%=330000 862500*40%=345000
55% collected the first month after the sale 750000*55%=412500 825000*55%=453750
Total collection 300000 742500 798750
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