Question

t is november 1 of year 1. sales for frasier company for november and december of year 1 and january of year 2 are forecasted to be as follows: november, 400,000; december 600,000; january, 200,000 on average, cost of goods sold is 70% of sales. during this period, frasier company expects inventory levels to remain constant. this means that inventory purchases are expected to equal the amount of cost of goods sold. 40% of purchases are for cash. of the credit purchases, 5% are paid during the month of the purchase, 65% in the month following the purchase, and 30% in the second month following the purchase. sales for september and october of year 1 were 100,000 and 150,000, respectively.

Answer 1

b. $274,400

Calculation:

Credit sales = 60%

Cash sales = 40%

Particulars $

Cash Purchase ($200,000 x 70% x 40%) = 56,000

Credit Purchase

January month ($200,000 x 70% x 60% x 5%) = 4,200

December month ($600,000 x 70% x 60% x 65%) = 163,800

November month ($400,000 x 70% x 60% x 30%) = 50,400

Total Cash Payments for purchase in January of year 2 = 274,400

What are Credit Sales?

Credit sales are transactions in which the debt will be paid in full at a later time. In other words, credit sales are transactions when the consumer does not pay in whole, in cash, at the time of the transaction.

Cash sales, credit sales, and advance payment sales are the three basic types of sales transactions. The timing of when cash is received is the only distinction between these sales transactions.

1. Sales made in cash: When a transaction is made and the customer receives their goods or services, cash is collected.

2. Credit sales: After the sale is made, the customer has a certain amount of time to pay the vendor.

3. Sales involving advance payments: Buyers pay the vendor in full before closing the deal.

To learn more about the, Credit Sales visit:

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