XYZ Company usually sells about 40 of its merchandise during

XYZ Company usually sells about 40% of its merchandise during a month for cash, 40% collected in the month after sale, and 10% in two months after the sale – 10% of the sales are never collected. Total budgeted sales for the second quarter are as follows:

April

$200,000

May

100,000

June

150,000

Assume all questions relate to the month of June.

1.

What are the expected receipts in June from accounts receivable for sales made in April?

2.

What are the expected receipts in June from accounts receivable for sales made in May?

3.

What are the total expected cash receipts in June?

April	$200,000
May	100,000
June	150,000

Solution

Answer 1 The expected receipts in June from accounts receivable for sales made in April = April sales * 10% = $200000 * 10% = $20,000 Answer 2 The expected receipts in June from accounts receivable for sales made in May = May Sales * 40% = $100000 * 40% = $40,000 Answer 3 The total expected cash receipts in June April sales collection $20,000 May sales collection $40,000 June sales collection [$150000 * 40%] $60,000 Total expected cash receipts in June $120,000