Use the following information for questions
Livanos, Inc.reports all its sales on credit, and pays operating costs in the month incurred.Amounts for 2020 are:

-Customer amounts on account are collected 70% in the month of sale and 30% in the following month.
-Cost of goods sold is 60% of sales.
-Livanos purchases and pays for merchandise 40% in the month of acquisition and 60% in the following month.
-Operating expenses are: Salaries, $50,000; Depreciation, $12,000; Rent, $15,000; and Utilities, $14,000.
-Accounts payable is used only for inventory acquisitions.
-How much cash will Livanos receive during May from customers?
A)$308,000
B)$311,000
C)$224,000
D)$299,000

Question

Use the following information for questions 
Livanos, Inc.reports all its sales on credit, and pays operating costs in the month incurred.Amounts for 2020 are:
  
-Customer amounts on account are collected 70% in the month of sale and 30% in the following month.
-Cost of goods sold is 60% of sales.
-Livanos purchases and pays for merchandise 40% in the month of acquisition and 60% in the following month.
-Operating expenses are: Salaries, $50,000; Depreciation, $12,000; Rent, $15,000; and Utilities, $14,000.
-Accounts payable is used only for inventory acquisitions.
-How much cash will Livanos receive during May from customers?
A)$308,000 
B)$311,000 
C)$224,000 
D)$299,000

Quizplus · Accepted Answer

- Total credit sales in May = $280,000 x 40% = $112,000
- Total credit sales in June = $280,000 - $112,000 = $168,000
- Cash collected in May from May sales = $112,000 x 70% = $78,400
- Cash collected in June from May sales = $112,000 x 30% = $33,600
- Cash collected in June from June sales = $168,000 x 70% = $117,600
- Therefore, total cash received in May from customers = $78,400. Answer choice B is the closest to this amount.

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