Question

Home Corporation will open a new store on January 1. Based on experience from its other retail outlets, Home Corporation is making the following sales projections: Cash Sales Credit Sales January $60,000 $40,000 February $30,000 $50,000 March $40,000 $60,000 April $40,000 $80,000 Home Corporation estimates that 70% of the credit sales will be collected in the month following the month of sale, with the balance collected in the second month following the month of sale. In a cash budget for April, the total cash receipts will be:

Answer 1

Answer:

$97,000

Explanation:

The computation of the total cash receipts for the month of April is shown below:

= Cash sales in April + (Credit sales in February × following second month percentage) + (Credit sales in March x following month percentage)

= $40,000 + ($50,000 x 30%) + ($60,000 x 70%)

= $40,000 + $15,000 + $42,000

= $97,000

We simply added the cash sales for one month and the credit sales for two months so that the total cash receipts could come