Question

Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the second following month. Wichita Industries' had $12,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales

Answer 1

Answer:

$67,060

Explanation:

February collection :

February Sales = $100,000 x 10 % + $100,000 x 90 % x 30 % = $37,000

January Sales =   $50,000 x 90 % x 50 %                                  = $22,500

December Sales = $42,000 x 90 % x 20 %                                =   $7,560

Total =                                                                                            = $67,060

therefore,

the expected cash receipts for February from current and past sales is $67,060