Information pertaining to Brenton Corporation\'s sales revenue is presented in t
ID: 2984421 • Letter: I
Question
Information pertaining to Brenton Corporation's sales revenue is presented in the following table: February March April Cash Sales $160,000 $150,000 $120,000 Credit Sales 300,000 400,000 280,000 Total Sales $460,000 $550,000 $400,000 Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 75% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month are 80% of the next month's projected total sales. All purchases of inventory are on account; 50% are paid in the month of purchase, and the remainder is paid in the month following the purchase.
Brentons total cash receipts in April are:
a) $448,000
b) $414,500
c) $431,600
d) $328,000
Explanation / Answer
cash sales = 120000
collectible credit sales = 0.95*280000 = 266000
collected credit sales in april = 0.75*266000 = 199500
collected credit sale of march in april = 0.25*(.95*400000) = 95000
total cash receipts = 120000 + 199500 + 95000 = 414500 $ option b