The Palos 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 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?

Question

Quizplus · Accepted Answer

For August, the expected cash receipts include:- 40% of August sales in cash: 0.40 * $44,000 = $17,600.- 50% of July's credit sales (60% of $54,000) collected in August: 0.50 * 0.60 * $54,000 = $16,200.- 45% of June's credit sales (60% of $48,000) collected in August: 0.45 * 0.60 * $48,000 = $12,960.Adding these amounts gives the total expected cash receipts for August: $17,600 + $16,200 + $12,960 = $46,760.

The Palos Company Expects Sales for June, July, and August