Question

Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales during the month of June. $561,500. $652,500. $817,500. $592,500. $890,000.

Answer 1

Answer:

The amount of cash received from total sales during the month of June is $890,000

Thus, the correct option is e. $890,000

Explanation:

The computation of total cash received in the month of June is shown below:

= Cash Sales + Credit sales

where,

Cash sale is 25% of June month = 25% × $950,000 = $237,500

So, credit sale would be 75%

And Credit sales proportion is :

30 % of (75% of June month) = $213,750

65% of (75% of May month)  = $438,750

So total cash sales = Cash sale + 30 % of (75% of June month) + 65% of (75% of May month)

= $237,500 + $213,750 + $438,750

= $890,000

The 5% is not considered while computing the total cash received part.

Hence,  the amount of cash received from total sales during the month of June is $890,000

Thus, the correct option is e. $890,000