Question

Memphis Company anticipates total sales for April, May, and June of $980,000, $1,080,000, and $1,130,000 respectively. Cash sales are normally 30% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales during the month of June.

Answer 1

To compute the amount of cash received from total sales during the month of June, we need to calculate the cash received from cash sales and credit sales separately and then sum them up.

1. Cash Sales:

Total sales for June: $1,130,000

Cash sales (30% of total sales): $1,130,000 * 0.30 = $339,000

2. Credit Sales:

Credit sales (70% of total sales): $1,130,000 * 0.70 = $791,000

Collections for credit sales:

- Collected in the same month: 30% of credit sales: $791,000 * 0.30 = $237,300

- Collected during the first month after the sale: 65% of credit sales: $791,000 * 0.65 = $513,150

- Not collected: 5% of credit sales: $791,000 * 0.05 = $39,550

Total cash received from credit sales: $237,300 + $513,150 = $750,450

3. Total Cash Received in June:

Cash received from cash sales + Cash received from credit sales:

$339,000 + $750,450 = $1,089,450

Therefore, the amount of cash received from total sales during the month of June is $1,089,450.