As of January 1 of the current year, the Grackle Company had accounts receivable

Question

As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March of 2009 were as follows: $120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of January? Answer $$74,000 $110,000 $71,600 $131,600

Explanation / Answer

The answer is $150 000 x 80% x 40% = 48000. The reason for this is: only 80% is on credit, 60% ( 72000) is collected during the month of sale. The 44800 (140000x 80% x 40%) that was carried over from the previous month would've been collected during March.

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