Question

Aqua Gardens Forecasts sales as follows: June $100,000 July $150,000 August $75,000 All sales are made...

Aqua Gardens Forecasts sales as follows:

June $100,000

July $150,000

August $75,000

All sales are made on credit; 60% are collected in the month after the sale and 40% is collected in the second month after the sale.

May's sales were $50,000 and April's sales wer $40,000

Prepare a monthly schedule of cash receipts for June, July, and August.

What would be the accounts receivable balance at the end of August?

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Answer #1

June:

For June, 40% of April's sales will be received and 60% of May's sales will be received

Cash receipt = 0.4*40000 + 0.6*50000 = $46,000

July:

For July, 40% of May's sales will be received and 60% of June's sales will be received

Cash receipt = 0.4*50000 + 0.6*100000 = $80,000

August:

For August, 40% of June's sales will be received and 60% of July's sales will be received

Cash receipt = 0.4*100000 + 0.6*150000 = $130,000

Accounts Receivables balance at August end = August sales + 40% of July' sales = $75,000 + 0.4*150000 = $135,000

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