Grace Manufacturing Company needs to know its anticipated cash inflows for the n

Question

Grace Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 30 percent in the month after the sale, and the remaining 20 percent two months after the sale. Gross sales for the quarter are projected as follows: January, $40,000. February, $20,000. and March, $60,000. Accounts receivable on December 31 were $30,000. Graces's expected cash collections for March would be how much? A) $60,000 B) $46,000 C) $47,200 D) $76,400

Explanation / Answer

Answer: C) $47200

Particulars Jan Feb March Gross sales 40000 20000 60000 20% cash sales 8000 4000 12000 Credit sales 32000 16000 48000 50 percent in the month of the sale 16000 8000 24000 30 percent in the month after the sale 9600 4800 20 percent two months after the sale 6400 Total collections from the sale 24000 21600 47200

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