COGS are 80% of Sales. You collect 40% of sales in the month of sale and the rem
ID: 2792028 • Letter: C
Question
COGS are 80% of Sales. You collect 40% of sales in the month of sale and the remaining 60% in the month following the sale. You purchase 50% of your COGS in the month of sale and 50% in the month prior to the sale. You pay for 30% of purchases in the month that it is purchased and the remaining 70% in the month after it is purchased.
How much was Cash Received in April?
a) 4400
b) 4800
c) 5400
d) 5800
What is the Inventory balance for the end of January?
a)2240
b) 2400
c) 2680
d) 2860
Dec Jan Feb March April May Sales 10000 7000 6000 5000 6000 7000 Cost of Goods Sold 8000 5600 4800 4000 4800 5600 Cash Received 8800 6600 6400 Purchases 5200 4400 4400 5200 Cash Used 1560 4400 4640 4480 Cash Generated by operations 7240 1640 1200 1920 Cash 1000 8240 9880 11080 13760 Accounts Receivable 6000 4200 3600 3600 4200 Inventory 2800 2000 2400 2800 Accounts Payable 4760 8400 7840 7840 8400 6720Explanation / Answer
Answer to Question No. 1:
Option C i.e. $5,400.
Cash received in April = 40% of April Sales + 60% of March Sales
Cash received in April = (6,000 * 40%) + (5,000 * 60%)
Cash received in April = $2,400 + $3,000
Cash received in April = $5,400
Answer to Question No. 2:
Option B i.e. $2,400
Inventory Balance at the end of January = 50% of Cost of Goods sold for the month of February
Cost of Goods sold for the month of February = $4,800
Inventory Balance at the end of January = 50% of $4,800
Inventory Balance at the end of January = $2,400
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