Answer (B) is correct . The $49,500 of receivables from November sales that are still outstanding at December 31 are the last amounts that will be received from November. The $162,000 in receivables from December sales that are still outstanding at December 31 contain the collections for the month and the second month after sale. Thus, this amount must constitute 90% of total sales for December (60% + 30%), meaning total December sales were $180,000 ($162,000 ÷ 90%). The portion of this that will be collected in January is $108,000 ($180,000 × 60%). Of January’s sales, 10% will be collected in January ($170,000 × 10% = $17,000). Therefore, total cash collections for January will be $174,500 ($49,500 + $108,000 + $17,000).
Answer (A) is incorrect because All receivables from November would be collected in January, as would 2/3 of December’s receivables.
Answer (C) is incorrect because The amount of $211,500, the amount of receivables at December 31, is not the amount that will be collected in January.
Answer (D) is incorrect because The amount of $228,500 results from failing to divide the December portion in its month-after and second-month-after components.
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At December 31, ANNCO reports accounts receivable of $211,500 Of that amount, $162,000 is due from December sales and $49,500 from November sales. ANNCO is budgeting $170,000 of sales for January. If so, what amount of cash should be collected in January?