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2 September, 09:45

As of January 1 of the current year, the Joyner Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each months sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February?

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  1. 2 September, 10:41
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    Total cash collections in February are $133600

    Explanation:

    The collections in the month of February will include 20% of sales made in February in account for cash sales.

    Cash sales = 140000 * 0.2 = $28000

    Thus, Credit sales for February are = 140000 - 28000 = $112000

    Out of these credit sales made in February, 60% will be collected in February. Thus, credit sales made in February that will be collected in February are,

    February collections from February credit sales = 112000 * 0.6 = $67200

    Total cash collections in February from February sales = 67200 + 28000

    Total cash collections in February from February sales = $95200

    In addition, out of the credit sales made in January, 40% will be collected in February.

    Collection from January sales in February = 120000 * 0.8 * 0.4 = $38400

    Total collections in February = 38400 + 95200 = $133600
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