Question

XYZ Company usually sells about 40% of its merchandise during a month for cash, 40% collected in the month after sale, and 10% in two months after the sale – 10% of the sales are never collected. Total budgeted sales for the second quarter are as follows:

April	$200,000
May	100,000
June	150,000

Assume all questions relate to the month of June.

1.	What are the expected receipts in June from accounts receivable for sales made in April?
2.	What are the expected receipts in June from accounts receivable for sales made in May?
3.	What are the total expected cash receipts in June?

Answer 1

Answer 1
The expected receipts in June from accounts receivable for sales made in April = April sales * 10% = $200000 * 10% = $20,000
Answer 2
The expected receipts in June from accounts receivable for sales made in May = May Sales * 40% = $100000 * 40% = $40,000
Answer 3
The total expected cash receipts in June
April sales collection	$20,000
May sales collection	$40,000
June sales collection [$150000 * 40%]	$60,000
Total expected cash receipts in June	$120,000