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

Question

As of January 1 of the current year, the Grayson Company had accounts receivables of $40,000. The sales for January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the 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? $64,000 $61,600 $121,600 $107,000

Explanation / Answer

Beginning account receivable $ 40,000 Sales in month of January $120,000 Cash Sales = 20% x 120000 $ 24,000 Credit sales = 120000 - 24000 $ 96,000 Cash collected from credit sales = 60% x 96000 $ 57,600 Total cash collected in month of January = *40000+24000+57600 $121,600 *40000 is the amount of receivable at beginning which will be collected in month of January

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