How to Calculate Cash Receipts for Quarter 4 – An Easy Guide for Social Science Students

The sales of Carephase Company for the year are as given below:Quarter 1 $400,000Quarter 2 $360,000Quarter 3 $620,000Quarter 4 $580,000Fifty 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.a. $588,000b. $526,000c. $552,000d. $595,000

A

To calculate the cash receipts for Quarter 4, we need to determine the total cash sales and the collections on the sales made on account for each quarter.

Total cash sales for the year = 50% of total sales
= 50% x ($400,000 + $360,000 + $620,000 + $580,000)
= 50% x $1,960,000
= $980,000

Collections on sales made on account for Quarter 1:
60% of $400,000 = $240,000 received in Quarter 1
40% of $400,000 = $160,000 received in Quarter 2

Collections on sales made on account for Quarter 2:
60% of $360,000 = $216,000 received in Quarter 2
40% of $360,000 = $144,000 received in Quarter 3

Collections on sales made on account for Quarter 3:
60% of $620,000 = $372,000 received in Quarter 3
40% of $620,000 = $248,000 received in Quarter 4

Collections on sales made on account for Quarter 4:
60% of $580,000 = $348,000 received in Quarter 4
40% of $580,000 = $232,000 received in Quarter 1 of the following year

Total cash receipts for Quarter 4 = cash sales + collections on sales made on account
= $580,000 (50%) + $348,000 (60%) + $232,000 (40%)
= $290,000 + $208,800 + $92,800
= $591,600

Therefore, the closest option to the calculated answer is (d) $595,000. However, the correct answer based on the calculations provided is $591,600.

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