Question

Black Horse Transportation’s sales budget for the first quarter follows:

January $125,000
February 300,000
March 290,000

All sales are on account (credit) with 50% collected in the month of sale, 30% collected in the following month after sale, and 20% collected in the second month after sale. There are no uncollectable accounts.

The March cash receipts are:

A. $102,500
B. $260,000
C. $250,500
D. $172,500

Answer 1

$260,000

Step-by-step explanation:

The computation of the march cash receipts is shown below:

= Month credit sales × month collection percentage + February credit sales × following month collection percentage + January credit sales × month of sale collection percentage

= $290,000 ×50% + $300,000 × 30% + $125,000 × 20%

= $145,000 + $90,000 + $25,000

= $260,000

We simply applied the above formula