Question

A company has the following budgeted sales: July $200,000 August $300,000 September $250,000 20% of the sales are for cash, and 80% are on credit. 25% of the credit sales are collected in the month of sale, and 75% are collected the next month. What are the total expected cash receipts during September? $262,500 $250,000 $275,000 $287,500 (Please show any working out and formuals

Answer 1

$280,000

Step-by-step explanation:

Given the following budgeted sales;

July = $200,000

August = $300,000

September = $250,000

And 20% of the sales are for cash, and 80% are on credit. 25% of the credit sales are collected in the month of sale, and 75% are collected the next month then,

Total expected cash receipts during September = (20% * $250,000) + ( 25% * 80% * $250,000) + (75% * 80% * $300,000)

= $50,000 + $50,000 + $180,000

=$280,000

Cash collection for September is made up of the 20% cash sale for the month, the 25% credit sale for the remaining 80% of the credit sale and the 70% of the 80% credit sale from the previous month August.