can someone help me out with this problem? Why is the correct option c? 5. Smith

Question

can someone help me out with this problem? Why is the correct option c?

5. Smith Company started business on September 1. Smith had credit sales of $200,000 in September and $300,000 in October. The pattern for collection of cash from customers is expected to be 40% in the month of sale (subject to a 2% cash discount), 50% in the month following the month of sale, and 7% in the second month following the month of sale, with 3% uncollectible. How much cash did Smith Company receive from customers on account during October?

a . $120,000 c. $217,600 b. $117,600 d. $220,000

Explanation / Answer

ANSWER:

IT IS ASKED THAT HOW MUCH CASH THE COMPANY HAS RECIEVED ON ACCOUNT DURING OCTOBER MONTH,THATMEANS THE SALES PARTICULARLY RELATED TO THAT MONTH ONLY.

THEREFORE CASH COLLECTED IN THE OCTOBER MONTH WOULD BE AS FOLLOWS:

SALES-300000

CASH RECIEVED = (300000*40%)-2% =120000-2400 = 117600

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