Greene Company has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected.

At the end of May, Greene Company has the following accounts receivable balances:

From April sales

$21,000

From May sales

48,000

Greene expected sales for June are $150,000. How much cash will Greene Company expect to collect in June?

a.

$127,400

b.

$129,000

c.

$148,600

d.

$152,520

The correct answer is C.

Explanation:

Giving the following information:

Greene Company has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected.

At the end of May, Greene Company has the following accounts receivable balances:

From April sales

$21,000 is 15%

14% = 0.14*21,000/0.15 = 19,600

From May sales

48,000 is 30%

15% = 0.15*48,000/0.30 = 24,000

Greene expected sales for June are $150,000.

Cash collection:

From April = 19,600

From May = 24,000

From June = 150,000*0.70 = 105,000

Total = $148,600