Question

EA14.

LO 7.3Halifax Shoes has 30% of its sales in cash and the remainder on credit. Of the credit sales, 65% is collected in the month of sale, 25% is collected the month after the sale, and 5% is collected the second month after the sale. How much cash will be collected in August if sales are estimated as $75,000 in June, $65,000 in July, and $90,000 in August?

Answer 1

$81,950

Step-by-step explanation:

The computation is shown below:

= August estimated sales × cash sales percentage + August estimated sales × credit sales percentage × collection percentage + July estimated sales × credit sales percentage × following collection percentage + June estimated sales × credit sales percentage × following second month collection percentage

= $90,000 × 30% + $90,000 × 70% × 65% + $65,000 × 70% × 25% + $75,000 × 70% × 5%

= $27,000 + $40,950 + $11,375 + $2,625

= $81,950

Since 30% represents the cash sales , so the remaining percentage would be 70%