Question

As of January 1 of the current year, Grayson Company had accounts receivable of $40,000. The sales for January, February, and March were $120,000, $140,000, and $150,000, respectively. Of each month’s sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. The total cash collected (both from accounts receivable and for cash sales) in the month of January is

a. $61,600

b. $121,600

c. $64,000

d. $107,000

Answer 1

To calculate the total cash collected in January, subtract the cash sales from total sales for the month, calculate the credit sales collected in January and February, and add the cash sales and credit sales collected in January. The total cash collected in January is $81,600.

Step-by-step explanation:

To calculate the total cash collected in the month of January, we need to break down the sales for January and calculate the cash and credit sales separately.

1. Step 1: Calculate the credit sales for January by subtracting the cash sales from the total sales: $120,000 - $24,000 (20% of $120,000) = $96,000.
2. Step 2: Calculate the amount of credit sales collected in January by multiplying the credit sales for January by 60%: $96,000 * 0.6 = $57,600.
3. Step 3: Calculate the amount of credit sales collected in February by multiplying the credit sales for January by 40%: $96,000 * 0.4 = $38,400.
4. Step 4: Calculate the total cash collected in January by adding the cash sales and the credit sales collected in January: $24,000 (cash sales) + $57,600 (credit sales collected in January) = $81,600.

Therefore, the total cash collected (both from accounts receivable and cash sales) in the month of January is $81,600.