Question

Wichita Industries' sales are 10% cash and 90% on credit. Credit sales are collected as follows: 40% in the month of sale, 50% in the next month, and 10% in the second following month. On December 31, the accounts receivable balance includes $21,000 from November sales and $51,000 from December sales. Assume that total sales for January are budgeted to be $59,000. What are the expected cash receipts for January from the current and past sales?

Answer 1

$57,100

Step-by-step explanation:

The technique for this question to follow closely the payment cycle

Calculation of January Cash Receipts

Cash Sales ($59,000 x 10%) $5,900

Credit Sales in January ($59,000 x 40%) $23,600

Credit Sales in December ($51,000 x 50%) $25,500

Credit Sales in December ($21,000 x 10%) $2,100

Total $57,100

Conclusion

the expected cash receipts for January from the current and past sales is $57,100