Ajax Corporation estimates that for credit sales, 20% of cash is received in the month of sale; 60% in the month after the sale, and 15% second month after the sale. The remainder is never collected.
Ajax had credit sales of $23,000 in January; $23,000 in February, and $19,000 in March. Given the
Following information, determine the cash collections for March.

Question

Quizplus · Accepted Answer

To calculate the cash collections for March, we need to first determine the total credit sales from January to March.

Total credit sales = $23,000 (January sales) + $23,000 (February sales) + $19,000 (March sales) 
= $65,000

Now, we can apply the given percentages to determine the cash collected in each month:

- Cash collected in January = 20% of $23,000 = $4,600 
- Cash collected in February = 60% of $23,000 + 20% of $19,000 = $16,400 
- Cash collected in March = 15% of $23,000 + 60% of $19,000 = $9,600

Therefore, the total cash collections for January to March = $4,600 + $16,400 + $9,600 = $30,600.

The correct answer is B) $20,600, which represents the cash collected in February. The question asks for the cash collections in March, but we need to calculate the previous months' cash collections to determine this.

Ajax Corporation Estimates That for Credit Sales, 20% of Cash