The sales of Carephase Company for the year are as given below: Quarter 1 $400,000 Quarter 2 $360,000 Quarter 3 $620,000 Quarter 4 $580,000 Fifty percent of the sales of the company are paid in cash. Of the sales on account, 60 percent are collected in the quarter of sale, the remaining 40 percent are collected in the quarter following the sale. Calculate the cash receipts for Quarter 4.

The correct answer is $588,000.

Explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the cash receipts for Quarter 4 by using following formula:

Cash receipts for Quarter 4 = Cash Sales + Cash collected from credit sales in Qtr 4 + Accounts receivable of Qtr 3

Where, Cash sales = $580,000 * 50% = $290,000

Cash collected from credit sales in Qtr 4 = ($580,000 * 50%) * 60% = $174,000

Accounts receivable of Qtr 3 = ($620,000 * 50%) * 40% = $124,000

By putting the value, we get

Cash receipts = $290,000+$174,000+$124,000

= $588,000