Question

Creasy expects 10% of sales to be collected in cash from the customer immediately, and the remaining 90% on credit. Credit sales are always paid in full in the following month. All direct materials purchased are paid for in cash, while all other expenses are paid in the following month. Calculate the budgeted cash receipts for October and November. Please provide a breakdown of cash receipts from sales and credit sales in both months.

Answer 1

The budgeted cash receipts for October are $1,000, with $1,000 coming from cash sales. The budgeted cash receipts for November are $12,000, with $1,200 coming from cash sales and $10,800 coming from credit sales.

Step-by-step explanation:

To calculate the budgeted cash receipts for October, we need to determine the cash receipts from sales and credit sales separately.

For sales, 10% of the sales amount is expected to be collected immediately in cash. Let's say the total sales for October are $10,000. Therefore, the cash receipts from sales in October will be $10,000 * 10% = $1,000.

For credit sales, the remaining 90% of the sales amount is expected to be collected in the following month. Since the credit sales are paid in full in the following month, the cash receipts from credit sales in October will be $0.

Summing up the cash receipts from sales and credit sales, the budgeted cash receipts for October will be $1,000.

For November, we can use the same method. Let's say the total sales for November are $12,000. The cash receipts from sales in November will be $12,000 * 10% = $1,200. Since these sales are credit sales, the cash receipts from credit sales in November will be $12,000 * 90% = $10,800. Summing up the cash receipts from sales and credit sales, the budgeted cash receipts for November will be $1,200 + $10,800 = $12,000.