Question

Problem 1- Schedule of Cash Receipts

Watt’s Lighting Stores made the following sales projection for the next six months. All sales are credit sales.

March……. $35,000 June……. $34,000

April…… $42,000 July……. $42000

May……. $25,000 August…. $48,000

Sales in January and February were $32,000 and $36,000, respectively. Experience has shown that of total sales, 10 percent are uncollectible, 30 percent are collected in the month of sale, 40 percent are collected in the following month, and 20 percent are collected two months after sale.

Prepare a monthly cash receipts schedule for the firm for March through August. Of the sales expected to be made during the six months from March through August, how much will still be uncollected at the end of August? How much of this is to be collected later?

Answer 1

Cash receipts Schedule
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
Sales	32,000	36,000	35,000	42,000	25,000	34,000	42,000	48,000
Collected in month of sale			10,500	12,600	7,500	10,200	12,600	14,400
One month after			14,400	14,000	16,800	10,000	13,600	16,800
2 months after			6,400	7,200	7,000	8,400	5,000	6,800
Collections			31,300	33,800	31,300	28,600	31,200	38,000
Collectible	42,000
Collected	37,200