The treasurer of Simmons Corporation, a newly formed software company is trying to ascertain Simmons cash flows for the next three months. Expected sales are:
$$\begin{array} { c r r r }
& \text { January } & \text { February } & \text { March } \
\text { Expected Sales } & \$ 200 & \$ 220 & \$ 300
\end{array}$$
50% of sales are made for cash. Simmons expects to receive 25% in the month following the sale and 20% in the second month following the sale. The remaining 5% are expected to be un-collectible. Gross margin is 20%, and purchases are made one month prior to sale. Purchases are paid one month after received.
-The cash inflows in March from sales will be:
A)$250.
B)$245.
C)$220.
D)None of the above

Question

The treasurer of Simmons Corporation, a newly formed software company is trying to ascertain Simmons cash flows for the next three months. Expected sales are:
$$\begin{array} { c r r r } 
& \text { January } & \text { February } & \text { March } \
\text { Expected Sales } & \$ 200 & \$ 220 & \$ 300
\end{array}$$
50% of sales are made for cash. Simmons expects to receive 25% in the month following the sale and 20% in the second month following the sale. The remaining 5% are expected to be un-collectible. Gross margin is 20%, and purchases are made one month prior to sale. Purchases are paid one month after received. 
-The cash inflows in March from sales will be:
A)$250.
B)$245.
C)$220.
D)None of the above

Quizplus · Accepted Answer

In March, Simmons Corporation will receive cash inflows from sales made in January, February, and March. For March, the cash inflows can be calculated as follows:- 50% of March sales in cash: 0.50 * $300 = $150- 25% of February sales in the following month (March): 0.25 * $220 = $55- 20% of January sales in the second month following the sale (March): 0.20 * $200 = $40Adding these amounts together gives a total cash inflow from sales in March of $150 + $55 + $40 = $245.

The Treasurer of Simmons Corporation, a Newly Formed Software Company