Question

A firm has actual sales in November of $1,000 and projected sales in December and January of $3,000 and $4,000, respectively. The firm makes 10 percent of its sales for cash, collects 40 percent of its sales one month following the sale, and collects the balance two months following the sale. The firm's total expected cash receipts in January:__________a) are $700b) are $2,100c) are $1,900d) cannot be determined with the information provided

Answer 1

b) are $2,100

Step-by-step explanation:

Given that the firm makes 10 percent of its sales for cash, collects 40 percent of its sales one month following the sale, and collects the balance two months following the sale.

It means that the firm's total expected cash receipts in January will be made of 10 percent of its sales in January, 40 percent of its sales in December and and 50 percent of the sales in November.

Hence,

The firm's total expected cash receipts in January = (10% of $4,000) + (40% of $3,000) + (50% of $1,000)

= $400 + $1200 + $500

= $2,100

Answer 2

(B) $2,100

Step-by-step explanation: