Question

Webster's Discount Appliances expects sales of $12,000, $15,000, and $25,000 during April, May, and June (big sale in June). To build business, Webster let's all customers buy on credit, and all do so. In the past, 20% of Webster's Discount Appliances sales have been collected during the month of sale, 65% are collected the following month, and 15% the month after that. If this trend continues, what will be Webster's total cash collections in the month of June

Answer 1

$16,550

Explanation:

The computation of total cash collections in the month of June is shown below:-

Total cash collections in the month of June = (June sales × Percentage of collection) + (May sales × Percentage) + (April × Percentage)

= ($25,000 × 20%) + ($15,000 × 65%) + ($12,000 × 15%)

= $5,000 + $9,750 + $1,800

= $16,550

So, for computing the total cash collections in the month of June we simply applied the above formula.