Freedom Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month.Cash sales are 20 percent of total sales each month.Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale.Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000. Accounts receivable on December 31 were $45,000.
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The expected cash collections of Freedom Manufacturing Company for March are
A) $90,000.
B) $69,600.
C) $64,500.
D) $114,600.

Question

Quizplus · Accepted Answer

- Cash sales for each month can be calculated as 20% of projected total sales for the month. 
- Sales on account for January can be broken down as follows: 
   - 50% collected in January = 50% * $60,000 = $30,000 
   - 35% collected in February = 35% * $60,000 = $21,000 
   - 15% collected in March = 15% * $60,000 = $9,000 
- Sales on account for February can be broken down as follows: 
   - 50% collected in February = 50% * $30,000 = $15,000 
   - 35% collected in March = 35% * $30,000 = $10,500 
- Sales on account for March can be broken down as follows: 
   - 50% collected in March = 50% * $90,000 = $45,000 
- Adding up all the cash inflows for March: 
   - Cash sales for March = 20% * $90,000 = $18,000 
   - Collected sales on account = $9,000 + $10,500 + $45,000 = $64,500 
- Therefore, the expected cash collections of Freedom Manufacturing Company for March are $18,000 + $64,500 = $69,600.

Freedom Manufacturing Company Needs to Know Its Anticipated Cash Inflows