25% of sales is collected in cash at the time of the sale,50% is collected in the month following the sale,and the remaining 25% is collected in the second month following the sale.Cost of goods sold is 75% of sales.Purchases are made in the month prior to the sale,and payments for purchases are made in the month of the sale.Total other cash expenses are $60,000/month.The company's cash balance as of February 28,2004 will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Dorian has no short-term borrowing as of February 28,2004.Assume that the interest rate on short-term borrowing is 1% per month.The company must have a minimum cash balance of $25,000 at the beginning of each month.Round all answers to the nearest $100.
-Based on the information in Table 1,what are Dorian Industries' total cash receipts (collections)for April 2004?

Question

Quizplus · Accepted Answer

- Total sales for April 2004 = $600,000 ($400,000 ÷ 0.50)
- Cash collected at time of sale = $150,000 ($600,000 × 0.25)
- Cash collected in the month following the sale = $300,000 ($600,000 × 0.50)
- Total cash receipts = $450,000 ($150,000 + $300,000)
- Option D is incorrect because it is asking for cash payments rather than receipts.

25% of Sales Is Collected in Cash at the Time