Question

Tzunam Corp. is preparing its cash budget. It expects to have sales of $30,000 in January, $35,000 in February, and $30,000 in March. If 20% of sales are for cash, 40% are credit sales paid in the month after the sale, and another 40% are credit sales paid 2 months after the sale, what are the expected cash receipts for March?
a. $36,000.
b. $39,600.
c. $42,480.
d. $42,840.
e. $40,320.

Answer 1

Answer:

The expected cash receipts for March is $32,000.

Note: The correct answer is $32,000 but this is not included in the option. Kindly confirm this from your teacher.

Explanation:

The expected cash receipts for March can be calculated as follows:

Cash received from sales in March = $30,000 * 20% = $6,000

Cash received from sales in February  = $35,000 * 40% = $14,000

Cash received from sales in January = $30,000 * 40% = $12,000

Therefore, we have:

Expected cash receipts for March = Cash received from sales in March + Cash received from sales in February + Cash received from sales in January = $6,000 + $14,000 + $12,000 = $32,000