As of January 1 of the current year, the Butner Company had accounts receivables
ID: 2350283 • Letter: A
Question
As of January 1 of the current year, the Butner Company had accounts receivables of $50,000. Sales for January, February, and March were as follows: $120,000, $140,000, and $150,000. 20% of each month’s sales 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. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February?a. $132,000
b. $105,600
c. $133,600
d. $95,200
Explanation / Answer
Calculating Total Cash collected in the month of February: Sales for January = $120,000 Sales for February = $140,000 Sales for March = $150,000 January Month's Cash Sales = [$120,000 * 20%] January Month's Cash Sales = $24,000 February Month's Cash Sales = [$140,000 * 20%] February Month's Cash Sales = $28,000 March Month's Cash Sales = [$150,000 * 20%] March Month's Cash Sales = $30,000 20% of each month’s sales 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. Total Cash collected in the month of February: 40% collected in the following month. February Month's Cash collected = [$28,000 + {($120,000 * 0.80) * 0.40} + {($140,000 * 0.80) *0.60} ] February Month's Cash collected = [$28,000 + $38,400 + $67,200] February Month's Cash collected = $133,600 Cash Collected in the Month of February = $133,600 Hence, the correct option is (c) = $133,600Related Questions
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