Camellia, a merchandising company, has provided the following extracts from their budget for the first quarter of the forthcoming year: Jan Feb March Sales (25% cash) $ 400 comma 000.00 $ 600 comma 000.00 $ 900 comma 000.00 The company collects 70% of credit sales in the same month and the balance in the next month. Calculate the collections from the customers for the month of February.

555 000 US$

Explanation:

                Cash sales(25%)                            Credit sales(75%)

January  (400,000*25%)=100000                    (400,000-100000)=300,000

February  (600,000*25%)=150,000            (600,000-150,000)=450,000

Customer collections to the month of February.

= $150,000 + ($450,000 * 0.7) + ($300,000*0.3)

(Balance collections = (100 - 70) = 30%)

Accounts Payable (Debt Owed) Debit $20,000

Cash Credit $5,000

Common Stock Credit.$15,000

Explanation:

To record the cash paid and common stock issued to accounts payable (Debt owed) for Weldon Engineering's.

Since the Company settled the debt through cash and common stock, cash decreases, therefore, cash account would be credit. Again, since the company issued common stock to settle the payment, issued common stock becomes credit and the debt owed becomes the debtholder of the company, therefore, his debt becomes the companys asset.