Memphis Company anticipates total sales for April,May,and June of $800,000,$900,000,and $950,000 respectively.Cash sales are normally 25% of total sales.Of the credit sales,30% are collected in the same month as the sale,65% are collected during the first month after the sale,and the remaining 5% are not collected.Compute the amount of cash received from credit sales for June.

Question

Quizplus · Accepted Answer

Step 1: Calculate the total credit sales for each month.

Credit sales for April = Total sales for April x (100% - 25%) = $800,000 x 75% = $600,000
Credit sales for May = Total sales for May x (100% - 25%) = $900,000 x 75% = $675,000
Credit sales for June = Total sales for June x (100% - 25%) = $950,000 x 75% = $712,500

Step 2: Determine the amount of credit sales collected in June from each of the three categories (same month, first month after sale, and remaining).

Same month collection for May credit sales = Credit sales for May x 30% = $675,000 x 30% = $202,500
First month collection for June credit sales = Credit sales for June x 65% = $712,500 x 65% = $462,375
Remaining credit sales = Credit sales for April + First month collection for May credit sales + Remaining credit sales for June - Total credit sales = $600,000 + $202,500 + ($712,500 x 5%) - ($600,000 + $675,000 + $712,500) = $12,525

Step 3: Add up the same month and first month collections for June credit sales.

Cash received from credit sales for June = Same month collection for May credit sales + First month collection for June credit sales = $202,500 + $462,375 = $664,875

Step 4: Round the answer to the nearest dollar (since the question doesn't ask for cents).

Thus, the answer is B) $652,500.

Memphis Company Anticipates Total Sales for April,May,and June of $800,000,$900,000,and