Johnson Equipment expects the following sales in January, February, and March: The controller has determined that the company collects credit sales as follows: 60% in the month of sale, 35% in the first month after sale, and 5% in the second month after sale.How much cash will be collected from customers in March?

Question

Johnson Equipment expects the following sales in January, February, and March:  The controller has determined that the company collects credit sales as follows: 60% in the month of sale, 35% in the first month after sale, and 5% in the second month after sale.How much cash will be collected from customers in March?

Quizplus · Accepted Answer

To calculate the total amount of cash collected, we need to first calculate the credit sales for each month:

January credit sales = 60% of $300,000 = $180,000
February credit sales = 60% of $350,000 = $210,000
March credit sales = 60% of $400,000 = $240,000

Next, we need to calculate the collections for each month:

January collections = $180,000
February collections = (35% of $180,000) + (60% of $210,000) = $111,000
March collections = (5% of $180,000) + (35% of $210,000) + (60% of $240,000) = $165,000

Therefore, the total cash collected in March is $165,000. The correct answer is B).

Johnson Equipment Expects the Following Sales in January, February, and March