Question

If Excel Inc. has projected sales of $30,000 in January, $20,000 in February, and $20,000 in March, where 80% of sales are on credit, 20% are collected in the month of sale, and 80% are collected the month after, what are the cash receipts in March?

A. $20,000

B. $16,200

C. $21,400

D. $10,300

Answer 1

To calculate Excel Inc.'s cash receipts for March, we combine 20% of March's sales collected in the same month with 80% of February's sales collected in March. This results in a total of $20,000 cash receipts for March, which matches option A.

Step-by-step explanation:

The student's question centers on calculating the cash receipts for Excel Inc. in March, considering the sales projections and the timeline of cash collections. The total projected sales for Excel Inc. are $30,000 in January, $20,000 in February, and $20,000 in March, with 80% of sales on credit, 20% cash collected in the month of sale, and the remaining 80% collected the following month.

To find the March cash receipts, we'll sum the cash collected immediately in March, which is 20% of March's sales, plus 80% of February's sales (since 80% of the sales are collected the following month). For March's immediate cash collection: $20,000 x 20% = $4,000.

The cash collected in March from February's credit sales would be: $20,000 x 80% = $16,000. Adding these two amounts gives us the total March cash receipts: $4,000 (from March sales) + $16,000 (from February credit sales) = $20,000.

Therefore, the correct answer for the cash receipts in March for Excel Inc. is $20,000, which corresponds to option A.