Page Company makes 30% of its sales for cash and 70% on account.60% of the account sales are collected in the month of sale,25% in the month following sale,and 12% in the second month following sale.The remainder is uncollectible.The following information has been gathered for Page's first year of operations:
$$\begin{array} { | l c | c | c | c | }
\hline \text { Month } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } \
\text { Total } & \$ 60,000 & \$ 70,000 & \$ 50,000 & \$ 30,000 \
\text { sales } & & & & \
\hline
\end{array}$$ Total cash receipts in Month 3 will be:

Question

Page Company makes 30% of its sales for cash and 70% on account.60% of the account sales are collected in the month of sale,25% in the month following sale,and 12% in the second month following sale.The remainder is uncollectible.The following information has been gathered for Page's first year of operations:
$$\begin{array} { | l c | c | c | c | } 
\hline \text { Month } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } \
\text { Total } & \$ 60,000 & \$ 70,000 & \$ 50,000 & \$ 30,000 \
\text { sales } & & & & \
\hline
\end{array}$$ Total cash receipts in Month 3 will be:

Quizplus · Accepted Answer

First, we need to find out the total account sales for the year:
Total Sales = \$60,000 + \$70,000 + \$50,000 + \$30,000 = \$210,000
Account Sales = 0.7 x \$210,000 = \$147,000
Of this, 60% will be collected in the month of sale: 0.6 x \$147,000 = \$88,200
25% will be collected in the following month: 0.25 x \$147,000 = \$36,750
12% will be collected in the second following month: 0.12 x \$147,000 = \$17,640
Uncollectible amounts = Account Sales - (amounts collected in month of sale + following month + second following month)
Uncollectible amounts = \$147,000 - (\$88,200 + \$36,750 + \$17,640) = \$4,410
Total cash receipts in Month 3 will be:
Cash Sales = 0.3 x (total sales) = 0.3 x \$210,000 = \$63,000
Account Sales collected in Month 3 = 60% x \$50,000 (sales in Month 3) = \$30,000
Total cash receipts in Month 3 = Cash Sales + Account Sales collected in Month 3 - Uncollectible amounts
Total cash receipts in Month 3 = \$63,000 + \$30,000 - \$4,410 = \$88,590
Therefore, the best choice is B) \$53,290.

Page Company Makes 30% of Its Sales for Cash and 70