Question

The Eccleston Company has the following budgeted sales: January $40,000, February $60,000, and March $50,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during March are
A : $56,000
B : $50,000
C :$53,000
D : $52,500

Answer 1

Answer:

B) $50,000

Explanation:

Month         total sales                $ collected                   outstanding credit

January      $40,000                 $16,000                                 $24,000

February    $60,000      $24,000 + $12,000                   $12,000 + $36,000          

March         $50,000   $20,000 + $12,000 + $18,000    $18,000 + $30,000

during March, Eccleston should collect ($50,000 x 40% from current sales) + ($24,000 x 50% from January) + ($36,000 x 50% from February) = $20,000 + $12,000 + $18,000 = $50,000