Question

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were:________

January $180,000

February 108,000

March 270,000

The cash inflow in the month of March is expected to be

a. $203,400.

b. $153,900.

c. $162,000.

d. $194,400.

Answer 1

a. $203,400

Step-by-step explanation:

The computation of cash inflow in the month of March is shown below:-

Collection from January Sales = $180,000 × 5%

= $9,000

Collection from February Sales = $108,000 × 30%

= $32,400

Collection from March Sales = $270,000 × 60%

= $162,000

Total collection in March = Collection from January Sales + Collection from February Sales + Collection from March Sales

= $9,000 + $32,400 + $162,000

= $203,400