Internal Manufacturing Company needs to know its anticipated cash inflows for th

Question

Internal Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 25 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 30 percent in the month after the sale, and the remaining 20 percent two months after the sale. Gross sales for the quarter are projected as follows: January, $40,000: February, $20,000: and March, $60,000. Accounts receivable on December 31 were $30,000. Internal's expected cash collections for March would be: A) $47,200 B) $48,000 C) $60,000 D) $76,400

Explanation / Answer

Jan - $40k

Feb - $20k

Mar - $60k

the sales are 50%, 30% and 20% in month of sale, next month and next to next month

so In Mar

from Jan sales = 20% of $40k = $8k

from Feb sales = 30% of $20k = $6k

from Mar sales = 50% of $60k = $30k

total collection in Mar = $44k

so cash collection in the accounts receivable in March= $44k/4 = $11k

None of the options.

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