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Procter & Gamble is preparing its cash budget. It expects to have sales of $40,000 in...

Procter & Gamble is preparing its cash budget. It expects to have sales of $40,000 in January, $30,000 in February, and $25,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, what are the expected cash receipts for March?

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Answer #1

Answer is $33,000

January Sales = $40,000
February Sales = $30,000
March Sales = $25,000

20% of sales are received during the month of sale, 40% of sale in one month after the sale and remaining 40% in 2 months after the sale.

Expected Cash Receipts for March = 20% * March Sales + 40% * February Sales + 40% * January Sales
Expected Cash Receipts for March = 20% * $25,000 + 40% * $30,000 + 40% * $40,000
Expected Cash Receipts for March = $5,000 + $12,000 + $16,000
Expected Cash Receipts for March = $33,000

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