Question

All of Gaylord Corporation's sales are on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company:
Total sales
January $50,000
February $60,000
March $40,000
April $30,000
What is the amount of cash that should be collected in March?
a) $24,000
b) $37.000
c) $41,000
d) $51,000

Answer 1

Answer:

The correct option is D

Cash collected in March = $51,000

Explanation

The total cash coming for March would be determined as follows:

Month of sales = 45% of march sales =(35%×  40,000)   = 14,000

Month following month of sales = 45%× February sales = 45%×60,000=27,000

Second month after sales = 20% × January sales = 20%× 50,000= 10,000

Total cash for march = 14,000 + 27,000  +10,000 = 51,000