Frozen Limited sold $1,750,000 worth of goods during the current year. The cost of goods sold is $1,050,000. Credit sales were $1,575,000, of which 40% were still outstanding. How much cash was collected by Frozen Ltd.?

Question

Quizplus · Accepted Answer

Total sales = $1,750,000
Cost of goods sold = $1,050,000
Therefore, gross profit = $700,000

Credit sales were $1,575,000, of which 40% were still outstanding, so the amount of credit sales that have been collected is:
$1,575,000 x 60% = $945,000

Cash collected = Total sales - outstanding credit sales + cost of goods sold
Cash collected = $1,750,000 - $945,000 + $1,050,000
Cash collected = $855,000 + $1,050,000
Cash collected = $1,120,000

Therefore, the answer is B) $1,120,000.

Frozen Limited Sold $1,750,000 Worth of Goods During the Current