Question

. JetGreen Cleaners makes 80% of its sales on credit. Experience shows that 25% of the credit customers pay in the month of sale, 55% within the following month, the rest during the next month. Total sales for May, June, July, and August are estimated at $180,000; $220,000; $280,000; and $200,000, respectively. Instructions: Determine budgeted cash receipts for July and August

Answer 1

Answer:

July = $237,600

August = $238,400

Explanation:

Note that credit sales account for only 80% of total sales, the remainder should be considered as cash receipts in the month of sale. Cash receipts for July are 20% of July total sales, plus 25% of July credit sales, plus 55% of June credit sales, and 20% of May credit sales:

$J = 0.20*280,000+0.8*(0.25*280,000+0.55*220,000+0.20*180,000)\\J= \ 237,600$

Cash receipts for August are 20% of August total sales, plus 25% of August credit sales, plus 55% of July credit sales, and 20% of June credit sales:

$A = 0.20*200,000+0.8*(0.25*200,000+0.55*280,000+0.20*220,000)\\A= \ 238,400$

Budgeted cash receipts are:

July = $237,600

August = $238,400