Ratchet Manufacturing anticipates total sales for August, September, and October of $200,000, $210,000, and $220, 500 respectively. Cash sales are normally 25% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale. Compute the amount of cash received for September.
Companies often extend credit to customers and allow them to pay for purchased merchandise at a later date. An accounts receivable is thus established for these customers. A cash budget must be maintained to keep up with expected cash receipts for the month.
Answer and Explanation:
Answer: b. $202,500.
- September sales = $210,000
- Cash sales = 25% of total sales
- Credit sales collected in the first month after the sale
September cash sales can be calculated as:
$210,000 * .25 = $52,500
Collections from August credit sales can be calculated as:
$200,000 - ($200,000 * .25) = $150,000
Amount of cash received for September can be calculated as:
$52,500 + $150,000 = $202,500
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Learn more about this topic:
from Finance 101: Principles of FinanceChapter 18 / Lesson 3