Question

A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 55% in the next month, 15% the following month, and 10% is uncollectible. Projected sales for December, January, and February are $63,000, $88,000 and $98,000, respectively. The February expected cash receipts from all current and prior credit sales is:

Multiple Choice

• $29,920

• $52,160

• $61,960

• $102,300

• $71,760

Answer 1

Correct answer-----------$61,960

Working

15% of December credit sales	$       7,560.00
55% of January credit sales	$    38,720.00
20% of February credit sales	$    15,680.00
Total collection in February	$    61,960.00

.

	December	Janurry	February
Total sales	$    63,000.00	$        88,000.00	$          98,000.00
Less: Cash sales	$    12,600.00	$        17,600.00	$          19,600.00
Credit sales	$    50,400.00	$        70,400.00	$          78,400.00