Asked by Carley Hirsch on Jul 14, 2024
Verified
As of January 1 of the current year, Grayson Company had accounts receivable of $40,000. The sales for January, February, and March were $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales) , 60% are collected in the month of sale, with the remaining 40% collected in the following month. The total cash collected (both from accounts receivable and for cash sales) in the month of January is
A) $64,000
B) $107,000
C) $61,600
D) $121,600
Accounts Receivable
Money owed to a company by its customers for products or services that have been delivered but not yet paid for.
Credit Sales
Transactions where goods or services are sold by a business but payment is received at a later date.
Cash Sales
Transactions in which payment for goods or services is made at the time of sale, typically in cash form.
- Derive anticipated cash transactions from projections of sales and operational costs.
- Grasp the significance of credit sales policies and collections in managing cash flow.
Verified Answer
AN
Amber NarezJul 19, 2024
Final Answer :
D
Explanation :
To calculate the total cash collected in January, consider the cash sales for January and the collection from credit sales in January, as well as the collection of accounts receivable from previous periods. January cash sales: 20% of $120,000 = $24,000. January credit sales collected in January (60% of 80% of January sales): 60% of 80% of $120,000 = 0.6 * 0.8 * $120,000 = $57,600. Collection from previous accounts receivable (assuming all are collected in January): $40,000. Total cash collected in January = $24,000 (January cash sales) + $57,600 (January credit sales collected in January) + $40,000 (previous accounts receivable) = $121,600.
Learning Objectives
- Derive anticipated cash transactions from projections of sales and operational costs.
- Grasp the significance of credit sales policies and collections in managing cash flow.