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Felix Co. expects June sales to be $29,000, July sales to be $35,000, August sales to...

Felix Co. expects June sales to be $29,000, July sales to be $35,000, August sales to be $32,000, and September sales to be 33,000. 40% of sales are cash sales and remaining 60% are credit sales. Collection of credit sales are 50% in the month of sale, 40% in the month following sale and 5% two months following sale. The remaining 5% is uncollectible. What is the expected total cash collections in August?

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Answer #1

The expected total cash collections in August is as follows:

August ($)
Cash Sale (40%) ($32,000 * 40%) 12,800
Collection of credit sales are 50% in the month of sale ($32,000 * 60% * 50%) 9,600
Collection of credit sales are 40% in the month following sale ($35,000 * 60% * 50%*40%) 4,200
Collection of credit sales are 5% in two months following sale ($29,000 * 60% * 50%*40%*5%) 261
The expected total cash collections in August $26,861

The expected total cash collections in August is $26,861

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