Question

It expects to have sales of $30,000 in January, $35,000 in February, and $35,000 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?

Answer 1

It expects to have sales of $30,000 in January, $35,000 in February, and $35,000 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?

Solution:

Credit (40%)

Cash (20%)

1. Firstly we have to find January credit sales collected in March:

$$\$30,000 \times 40\% = \$12,000$$

2. February credit sales collected in March:

$$\$35,000 \times 40\% = \$14,000$$

3. Cash collected from March cash sales:

$$\$35,000 \times 20\% = \$7,000$$

Total expected cash receipts for March= January credit sales collected in March + February credit sales collected in March + Cash collected from March cash sales = $12,000 + $14,000 + $7,000 = $33,000

Total expected cash receipts for March = $33,000