Memphis Company anticipates total sales for April, May, and June of $990,000, $1,090,000, and $1,140,000 respectively. Cash sales are normally 20% of total sales. Of the credit sales, 35% are collected in the same month as the sale, 60% are collected during the first month after the sale, and the remaining 5% are not collected.
Required:
(a) Compute the amount of cash received from credit sales during the month of June.

$842,400

Explanation:

Given that,

Sales in April = $990,000

Sales in May = $1,090,000

Sales in June = $1,140,000

Cash sales = 20% of total sales

Of the credit sales,

35% are collected in the same month as the sale

60% are collected during the first month after the sale

5% are not collected.

Therefore, the cash received from credit sales during the month of June includes the 35% of the credit sales in the month of June and the 60% of the credit sales in the month of May.

Credit sales in June:

= 80% of the total sales in June (as 20% are the cash sales)

= 0.8 × $1,140,000

= $912,000

Credit sales in May:

= 80% of the total sales in May (as 20% are the cash sales)

= 0.8 × $1,090,000

= $872,000

Hence, the amount of cash received from credit sales during the month of June:

= 35% of the credit sales in the month of June + 60% of the credit sales in the month of May

= (0.35 × $912,000) + (0.6 × $872,000)

= $319,200 + $523,200

= $842,400

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