Question

Month of sale: 40%

Month following sale: 60%

All sales are on credit. If credit sales for January and February are $100,000 and $200,000, respectively, the cash collections for February are

a. $140,000.
b. $300,000.
c. $120,000.
d. $160,000.
e. $80,000.

Answer 1

The cash collections for February, calculated from the credit sales of January and February, amount to $140,000, which is option a.

Step-by-step explanation:

To determine the cash collections for February, we need to consider the sales on credit from January and February and their respective collection percentages. The credit sales for January were $100,000, of which 60% is collected in February, resulting in $60,000. The credit sales for February are $200,000, of which 40% is collected in the same month, which equals $80,000. Therefore, the total cash collections for February would be the sum of the collections from January's and February's sales, which is $60,000 + $80,000 = $140,000.