A firm has actual sales in November of $1,000 and projected sales in December and January of $3,000 and $4,000, respectively. The firm makes 10 percent of its sales for cash, collects 40 percent of its sales one month following the sale, and collects the balance two months following the sale. The firm's total expected cash receipts in January is ________.
A) $700
B) $2,100
C) $1,900
D) $300

Question

Quizplus · Accepted Answer

In January, the firm expects to collect cash from sales made in November, December, and January. For November ($1,000 sales), it collects the balance two months following the sale, which is 50% (100% - 10% cash - 40% next month) = $500. For December ($3,000 sales), it collects 40% one month following the sale = $1,200. For January ($4,000 sales), it collects 10% as cash sales = $400. Adding these amounts gives $500 + $1,200 + $400 = $2,100.

A Firm Has Actual Sales in November of $1,000 and Projected