The Johann's Professional Service Company expects 70% of sales for cash and 30% on credit.The company collects 80% of its credit sales in the month following sale,15% in the second month following sale,and 5% are not collected.Expected sales for June,July,and August are $54,000,$48,000,and $44,000,respectively.What are the company's expected total cash receipts in August?

Question

Quizplus · Accepted Answer

To calculate the expected total cash receipts in August, we need to first find the total credit sales for each month, which would be the sales for that month multiplied by the proportion of sales made on credit (30%).

For June: $54,000 x 0.3 = $16,200
For July: $48,000 x 0.3 = $14,400
For August: $44,000 x 0.3 = $13,200

Next, we need to determine how much of these credit sales will be collected in August, which is given as 5% of credit sales.

For June: $16,200 x 0.05 = $810
For July: $14,400 x 0.05 = $720
For August: $13,200 x 0.05 = $660

Now we can calculate the expected total cash receipts in August by adding together the cash sales for August and the credit sales that will be collected in August.

Expected cash sales in August: $44,000 x 0.7 = $30,800
Expected credit collections in August: $810 + $720 + $660 = $2,190

Total expected cash receipts in August: $30,800 + $2,190 = $32,990

Therefore, the correct answer is A) $45,920, which is the calculation made by adding up the expected cash sales for each month, but this is not the question asked.

The Johann's Professional Service Company Expects 70% of Sales for Cash