Question

A firm has actual sales of $ 65 comma 000 in April and $ 60 comma 000 in May. It expects sales of $ 70 comma 000 in June and $ 100 comma 000 in July and in August. Assuming that sales are the only source of cash inflows and that half of them are for cash and the remainder are collected evenly over the following 2​ months, what are the​ firm's expected cash receipts for​ June, July, and​ August?

Answer 1

The​ firm's expected cash receipts for​ June, July, and​ August are $66,250, $82,500 and $92,500 respectively.

Step-by-step explanation:

Given that the only inflow of cash is from sales and half of sales are for cash and the remainder are collected evenly over the following 2​ months.

It means that expected cash receipts for​ June will include 50% of sales in June, 25% of sales in May and 25% of sales in April.

Similarly, expected cash receipts for​ July will include 50% of sales in July, 25% of sales in June and 25% of sales in May.

Also, expected cash receipts for​ August will include 50% of sales in August, 25% of sales in July and 25% of sales in June.

Hence expected cash receipts for;

June = (50% × 70000) + (25% × 60000) + (25% × 65000)

= $66,250

July = (50% × 100000) + (25% × 70000) + (25% × 60000)

= $82,500

August = (50% × 100000) + (25% × 100000) + (25% × 70000)

= $92,500