A firm has projected sales in May, June, and July of $100, $200, and $300, respectively. The firmmakes 20 percent of sales in cash and collects the balance one month following the sale. The firm'stotal cash receipts in July
A) are $200.
B) are $180.
C) are $220.
D) cannot be determined with the information provided.

Question

Quizplus · Accepted Answer

Sales in May are $100, of which 20% or $20 will be collected in cash. The remaining $80 will be collected in June.
Sales in June are $200, of which 20% or $40 will be collected in cash. The remaining $160 will be collected in July.
Sales in July are $300, of which 20% or $60 will be collected in cash. The remaining $240 will be collected in August.
Therefore, the total cash receipts in July will be $20 + $40 + $60 = $120. However, since the firm collects the balance one month following the sale, the $80 from May sales and the $160 from June sales will also be collected in July, bringing the total cash receipts to $120 + $80 + $160 = $220.

A Firm Has Projected Sales in May, June, and July