Wichita Industries' sales are 20% cash and 80% on credit. Credit sales are collected as follows: 40% in the month of sale, 50% in the next month, and 10% in the second following month. On December 31, the accounts receivable balance includes $13,000 from November sales and $42,000 from December sales. Assume that total sales for January are budgeted to be $51,000. What are the expected cash receipts for January from the current and past sales? a. 26,520b. 60,520c. 62,820d. 64,320e. 74,520

The correct answer is E that is $74,520

Explanation:

The expected cash receipts for January from the current and past sales is computed as:

Cash sales for January = Budgeted sales * 20% cash collected

= $51,000 * 20%

= $10,200

Credit Sales is computed as:

For November is $13,000

For December = December Sales / 60 * 50

= $42,000 / 60 * 50

= $35,000

For January = Budgeted Sales * 80 % * 40%

= $51,000 * 80% * 40%

= $16,320

Total January Sales = Cash Sales + Credit Sales

= $10,200 + $13,000 + $35,000 + $16,320

= $74,520