As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March of 2012 were as follows: $120,000, $140,000 and $150,000. 20% of each month’s 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 January?
To calculate the total cash collected in the month of January, we need to determine the amount collected from accounts receivable and the amount collected from cash sales.
First, let's calculate the credit sales for each month.
In January, 80% of $120,000 in sales were on credit. This is equal to (80/100) * $120,000 = $96,000.
In February, 80% of $140,000 in sales were on credit. This is equal to (80/100) * $140,000 = $112,000.
In March, 80% of $150,000 in sales were on credit. This is equal to (80/100) * $150,000 = $120,000.
Next, let's determine how much of the credit sales were collected in the month of January and how much were collected in the following month.
In January, 60% of the credit sales for January were collected, so we have (60/100) * $96,000 = $57,600.
In February, 40% of the credit sales from January were collected, so we have (40/100) * $96,000 = $38,400.
Now, let's calculate the total cash collected in the month of January.
The cash sales for January were equal to 20% of the sales, which is (20/100) * $120,000 = $24,000.
Adding up the cash collected from accounts receivable and cash sales, we have $57,600 + $38,400 + $24,000 = $120,000.
Therefore, the total cash collected in the month of January is $120,000.