Table 1
Dunder Company's projected sales for the first six months of 2017 are given below:
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, 2017, will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Dunder has no short-term borrowing as of February 28, 2017.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 Dunder Company's total cash receipts (collections)for April 2017?
A)$400,000
B)$300,000
C)$100,000
D)($60,000)

Question

Table 1
Dunder Company's projected sales for the first six months of 2017 are given below:
  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, 2017, will be $40,000.Excess cash will be used to retire short-term borrowing (if any).Dunder has no short-term borrowing as of February 28, 2017.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 Dunder Company's total cash receipts (collections)for April 2017?
A)$400,000 
B)$300,000 
C)$100,000 
D)($60,000)

Quizplus · Accepted Answer

To calculate total cash receipts for April 2017, we need to find the total amount of sales that were made in January and February (since 25% of these sales will be collected in April) and the total amount of sales made in March (since 50% of these sales will be collected in April). 
Sales for January = $500,000
Sales for February = $600,000
Sales for March = $700,000
Total sales = $1,800,000

Cash collections for April:
25% of January sales = $125,000
25% of February sales = $150,000
50% of March sales = $350,000
Total cash receipts = $625,000

Therefore, the correct answer is B) $300,000.

Table 1 Dunder Company's Projected Sales for the First Six Months of Months