Question

Frankie's Chocolate Co. reports the following information from its sales budget: Expected Sales: July $ 100,000 August 120,000 September 130,000 Cash sales are normally 30% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

Answer 1

Total cash receipts = 123,000

Step-by-step explanation:

September cash receipts:

30% of september sales:

30% of 130,000 = 39,000

70% of August sales (previous month)

70% of 120,000 = 84,000

Total cash receipts = 123,000

Note: We are asked for september collection from sales:

30% of september is in cash, so are colected instantly.

Then the remaining, which are credit sales are canceled in the following month.

So the credit sales of August are collected in the following month, which is september. That's why it is included in the calculation.

July sales are colelcted in July and August, none in september.