Question

The Johann's Professional Service Company expects 80% of sales for cash and 20% on credit. The company collects 80% of its credit sales in the month following sale, 15% in the second month following sale, and 5% are not collected (that is, they are "bad debts"). Expected sales for June, July, and August are $55,000, $61,000, and $51,000, respectively. What are the company's expected total cash receipts in August?

Answer 1

Ans - $52210

Computation of cash receipts of August

Particulars	June ($)	July ($)	August ($)
Expected sales of the month	55000	61000	51000
A Cash collected in the month (80% of expected sales)	44000	48800	40800
Credit sales of the month (20% of expected sales)	11000	12200	10200
B 80% of previous month's credit sale collected	-	8800 (11000 X 80%)	9760 (12200 X 80%)
C 15% of credit sales collected after 2 months	-	-	1650 (11000 X 15%)
TOTAL CASH RECEIPTS (A + B + C)	-	-	$52210

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