Question

20% of the sales are for cash, and 80% are on credit. 25% of the credit sales are collected in the month of the sale, and 75% are collected the next month. What are the expected cash receipts during September?

Answer 1

The expected cash receipts during September are 40% of the sale in September and 60% of the sales in August.

Step-by-step explanation:

25% of the credit sales are collected in the month of the sale, this is (25% x 0.8) 20% of the sales are collected in the month of the sale.

20% of the sales are for cash.

Therefore 60% of the sales are collected in the next month.

The expected cash recceipts during the month of the sale (September) are

40% (20% of collected sales and 20% of the sales are for cash) of the sale in September and 60% of the sales in August.