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The Johann's Professional Service Company expects 80% of sales for cash and 20% on credit. The...

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?

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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

(If there are any questions, kindly let me know in comments. If the solution is to your satisfaction, a thumbs up would be appreciated. Thank You)

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