Question

As of January 1 of the current year, the Joyner Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February?

Answer 1

Answer:

Total cash collections in February are $133600

Explanation:

The collections in the month of February will include 20% of sales made in February in account for cash sales.

Cash sales = 140000 * 0.2 = $28000

Thus, Credit sales for February are = 140000 - 28000  =  $112000

Out of these credit sales made in February, 60% will be collected in February. Thus, credit sales made in February that will be collected in February are,

February collections from February credit sales = 112000 * 0.6  = $67200

Total cash collections in February from February sales = 67200 + 28000

Total cash collections in February from February sales = $95200

In addition, out of the credit sales made in January, 40% will be collected in February.

Collection from January sales in February = 120000 * 0.8 * 0.4 = $38400

Total collections in February = 38400 + 95200   = $133600