The sales terms for a company are 10 percent down and the balance due by the end of the following month.Sales for January, February and March were $8,500, $11,500 and $13,000 respectively.The cash collections from operations for the month of February would be closest to?

Question

Quizplus · Accepted Answer

The 10% down payment for February would be $1,150 (10% of $11,500). So, the remaining balance to be paid by the end of March would be $10,350 ($11,500 - $1,150).

Since we need to find the cash collections for February, we only consider the amount of money that has been received by the company at that time.

In January, the company would have received $850 (10% of $8,500). In February, the company would have received the $1,150 down payment from February sales and $850 from January sales, bringing the total to $2,000.

Therefore, the cash collections from operations for the month of February would be closest to $8,800 (which is answer choice B).

The Sales Terms for a Company Are 10 Percent Down