As of January 1 of the current year, Grayson Company had accounts receivable of $40,000. The sales for January, February, and March were $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. The total cash collected (both from accounts receivable and for cash sales) in the month of January is
A)$64,000
B)$107,000
C)$61,600
D)$121,600

Question

Quizplus · Accepted Answer

To calculate the total cash collected in January, consider the cash sales for January and the collection from credit sales in January, as well as the collection of accounts receivable from previous periods. January cash sales: 20% of $120,000 = $24,000. January credit sales collected in January (60% of 80% of January sales): 60% of 80% of $120,000 = 0.6 * 0.8 * $120,000 = $57,600. Collection from previous accounts receivable (assuming all are collected in January): $40,000. Total cash collected in January = $24,000 (January cash sales) + $57,600 (January credit sales collected in January) + $40,000 (previous accounts receivable) = $121,600.

As of January 1 of the Current Year, Grayson Company