Question

Graham Potato Company has projected sales of $6,000 in September, $10,000 in October, $16,000 in November, and $12,000 in December. Of the company’s sales, 20 percent are paid for by cash and 80 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after. Determine collections for November and December.

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Sales:

September= $6,000

October= $10,000

November= $16,000

December= $12,000

Of the company’s sales, 20 percent are paid for by cash, and 80 percent are sold on credit.

Cash collection November:

Sales in cash= (16,000*0.2)= 3,200

Sales on account October= (10,000*0.8)*0.4= 3,200

Sales on account September= (6,000*0.8)*0.6= 2,880

Total cash collection= $9,280

Cash collection December:

Sales in cash= (12,000*0.2)= 2,400

Sales on account October= (10,000*0.8)*0.6= 4,800

Sales on account November= (16,000*0.8)*0.4= 5,120

Total cash collection= $12,320