Use the following information to answer the five questions in the quiz: Door & W
ID: 2377566 • Letter: U
Question
Use the following information to answer the five questions in the quiz: Door & Window Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:
August- $$120,000
September- $200,000
October- $230,000
1. The company expects to sell 40% of its merchandise for cash. Of the sales on account, 25% are expected to be collected in the month of the sale and the remainder in the following month.
What are the total credit sales for August:
a. $120,000
b. $72,000
c. $48,000
d. none of the above
2. What are the total credit sales for October:
a. $92,000
b. $120,000
c. $138,000
d. none of the above
3. What are the total cash collections for August?
a. $120,000
b. $72,000
c. $48,000
d. $66,000
4.What are the total cash collections for September?
a. $164,000
b. $80,000
c. $200,000
d. $120,000
5. What are the total cash collections for October?
a. $230,000
b. $138,00
c. $216,500
d. $92,000
Explanation / Answer
1. The company expects to sell 40% of its merchandise for cash. Of the sales on account, 25% are expected to be collected in the month of the sale and the remainder in the following month.
What are the total credit sales for August:
= 60%*120,000 = 72,000
b. $72,000
2. What are the total credit sales for October:
=60%*230,000 = 138000
c. $138,000
3. What are the total cash collections for August?
= 40%*120000 Cash +25%*(120000-40%*120000) of Credit sales
= 40%*120000 + 25%*60%*120000
= 66000
d. $66,000
4.What are the total cash collections for September?
= 75%*(120000-40%*120000)of Aug + 40%*200000 + 25%*(200000-40%*200000)
= 75%*60%*120000 + 40%*200000+25%*60%*200000
= 164000
a. $164,000
5. What are the total cash collections for October?
=75%*(200000-40%*120000)of Sep + 40%*230000 + 25%*(230000-40%*230000)
= 75%*60%*200000 + 40%*230000+ 25%*60%*230000
= 216500
c. $216,500