Mercer,Inc.had the following sales for the past six months.Mercer collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale. What are Mercer's total cash receipts for the month of June?

Question

Mercer,Inc.had the following sales for the past six months.Mercer collects its credit sales 30% in the month of sale,60% one month after the sale,and 10% two months after the sale.  What are Mercer's total cash receipts for the month of June?

Quizplus · Accepted Answer

To find out Mercer's total cash receipts for the month of June, we need to look at the credit sales made in April (which will be due for collection in June as per the given credit collection pattern).

Total credit sales made in April = $450,000

30% of credit sales collected in the month of sale = 30/100 x $450,000 = $135,000

60% of credit sales collected one month after sale (i.e. in May) = 60/100 x $450,000 = $270,000

10% of credit sales collected two months after sale (i.e. in June) = 10/100 x $450,000 = $45,000

Total cash collected in June = cash collected from sales made in April = $135,000 + $45,000 = $180,000

Therefore, the best choice is C) $195,400 since it is closest to $180,000.