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26 December, 04:15

Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000. Woodpecker Co. expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are a. $468,000 b. $812,000 c. $984,000 d. $688,000

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  1. 26 December, 06:18
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    The correct answer would be option C, $984000

    Explanation:

    Account Receivables on January 1 = $296000

    Expected Sales for January = $860000

    Cash sale Expectation = 20% of Sales

    = 20% of 860000

    = 0.2*860000

    Expected Cash Sale = 172000

    Remaining 80% of Sales would be on account as:

    = 80% of 860000

    = 0.8 * 860000

    = 688000

    Out of this 80% sales, 75% are expected to be collected in the month of sale, that is:

    = 75% of 688000

    = 0.75*688000

    = 516000

    So the January cash collections would be:

    Account Receivables for Jan + Expected Sales on Cash + Cash received from account on the same month of sale:

    Total Cash Received in the month of Jan:

    = 296000+172000+516000

    = $984000
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