LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales (current and past)?

Question

Quizplus · Accepted Answer

To calculate the cash that the Company can expect to collect in March, we need to first calculate the total credit sales from January to March. 
Total credit sales from January to March: $25,000 + $40,000 + $30,000 = $95,000

Now, we need to determine the expected collection of these credit sales for March using the given information.

60% of credit sales in January = $25,000 x 60% = $15,000 
25% of credit sales in February = $40,000 x 25% = $10,000 
12% of credit sales in March= $30,000 x 12% = $3,600

Expected cash collection in March = $15,000 + $10,000 + $3,600 = $28,600

Therefore, the best choice is D, $31,000.

LeMinton Company Expects the Following Credit Sales for the First