Question

The Ballentine Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following the sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?

Answer 1

Answer:

The Cash Receipts in August is $45380

Explanation:

August Cash sales = Total Sales x Percentage of Cash Sales = $44000 x 60% = $17600

Credit Sales in Month of August = Total Sales - Cash sales = $44000 - $17600 = $26400

Collection of August Credit sales in August =  Credit Sales of August x Percentage of Sales collection in August

Collection of August Credit sales in August = $26400 x 50% = $13200

Credit Sales of July = Total of July x Percentage of Credit Sales

Credit Sales of July = $54000 x 60% = $32400

July Credit sales collected in August = $32400 X 45% = $14580

Total August Collection  = Cash Sales in August + August Sales collected in August + July Sales collected in July

Total August collection = $17600 + $13200 + $14580 = $45380