Sessional Company finds that typically 30% of a month's sales are paid in cash. Payments on accounts receivable are 60% in the month of sale and 38% in the month following sale. Budgeted sales for June are $100,000, for July are $140,000, and for August are $120,000. What are the total cash receipts budgeted for July?

Question

Quizplus · Accepted Answer

The cash receipts budget for July can be calculated by analyzing the payment patterns for both cash sales and accounts receivable.

Cash sales:

$140,000 (total sales in July) x 30% (paid in cash) = $42,000

Accounts receivable:

60% of June sales ($100,000 x 60%) = $60,000 
38% of July sales ($140,000 x 38%) = $53,200

Total cash receipts budgeted for July:

$42,000 (cash sales) + $60,000 (June accounts receivable) + $53,200 (July accounts receivable) = $127,400

Therefore, the correct answer is choice C).

Sessional Company Finds That Typically 30% of a Month's Sales