A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, and 30% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts from all current and prior credit sales is $80,500.

Question

Business

Haylee Grimes

25 September, 02:52

A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, and 30% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts from all current and prior credit sales is $80,500.

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Victor Barry · Answer 1

64,400

Explanation:

The March expected cash receipts is shown below:

Based on January month

= Projected sales * credit percentage * collection percentage

= $75,000 * 80% * 30%

= $18,000

Based on February month

= Projected sales * credit percentage * collection percentage

= $92,000 * 80% * 50%

= $36,800

Based on March month

= Projected sales * credit percentage * collection percentage

= $60,000 * 80% * 20%

= $9,600

So, the expected cash receipts on march month is

= $18,000 + $36,800 + $9,600

= 64,400

Since the 20% represents cash sales so 80% is credit sales