This is total March sales multiplied by the percentage of March credit sales collected during March plus total February sales multiplied by the percentage of February credit sales collected during March plus total January sales multiplied by the percentage of January credit sales collected during March. This answer neglects two things: (1) Sales made on credit each month are only 40% of the total sales. Therefore, each month's sales should be multiplied by .40 before multiplying it by the percentage of the month's receivables to be collected during March. (2) 60% (100% ? 40% credit sales) of each month's sales are cash sales, so 60% of the total sales for March will be received during March.
This answer results from reducing the credit sale collections by 5% of credit sales before calculating the percentage of credit sales collected. (For example, 50% of March credit sales collected in March is calculated incorrectly as $250,000 × .40 × .95 × .50.) This is incorrect because the problem gives the total percentage of credit sales that will ultimately be collected, and that percentage is 95% (50% + 30% + 15%). The 5% that will be uncollectible has already been removed from the amounts that will be collectible. Therefore, reducing each individual collected amount by 5% is a duplication. For example, 50% of March credit sales collected in March should be calculated as $250,000 × .40 × .50.
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Collections will be as follows during March: March cash sales - $250,000 × .60 $150,000 Collected from March credit sales - $250,000 × .40 × .50 50,000 Collected from February credit sales - $240,000 × .40 × .30 28,800 Collected from January credit sales - $220,000 × .40 × .15 13,200 Total receipts for March $242,00
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Sales for June are projected to be $255,000. Based on this information, the expected cash receipts for March would be