Chapter 2: 18BP (page 116)

Simpson Glove Company has made the following sales projections for the next six months. All sales are credit sales.
March
$41,000
April
50,000
May
32,000
June
47,000
July
58,000
August
62,000
Sales in January and February were $41,000 and $39,000, respectively. Experience has shown that of total sales receipts 10 percent are uncollectible, 40 percent are collected in the month of sale, 30 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.

Short Answer

Expert verified

Schedule of cash receipts

Months	Credit sales	In the month of sales @ 40% (A)	One month after sales @ 30% (B)	Two month after sales @ 20% (C )	Total cash receipts (A+B+C)
January	$41,000
February	39,000
March	41,000	16,400	11,700	8,200	36,300
April	50,000	20,000	12,300	7,800	40,100
May	32,000	12,800	15,000	8,200	36,000
June	47,000	18,800	9,600	10,000	38,400
July	58,000	23,200	14,100	6,400	43,700
August	62,000	24,800	17,400	9,400	51,600

Step by step solution

Cash receipt in the month of March

$\begin{array}{rcl} Cash receipt & = & (Sale of march \times 40 %) + (Sale of february \times 30 %) + (Sale of january \times 20 %) \\ = & ($ 41, 000 \times 40 %) + ($ 39, 000 \times 30 %) + ($ 41, 000 \times 20 %) \\ = & $ 36, 300 \end{array}$

Cash receipt in the month of April

$\begin{array}{rcl} Cash receipt & = & (Sale of april \times 40 %) + (Sale of march \times 30 %) + (Sale of february \times 20 %) \\ = & ($ 50, 000 \times 40 %) + ($ 41, 000 \times 30 %) + ($ 39, 000 \times 20 %) \\ = & $ 40, 100 \end{array}$

Cash receipt in the month of May

$\begin{array}{rcl} Cash receipt & = & (Sale of may \times 40 %) + (Sale of april \times 30 %) + (Sale of march \times 20 %) \\ = & ($ 32, 000 \times 40 %) + ($ 50, 000 \times 30 %) + ($ 41, 000 \times 20 %) \\ = & $ 36, 000 \end{array}$

Cash receipt in the month of June

$\begin{array}{rcl} Cash receipt & = & (Sale of june \times 40 %) + (Sale of may \times 30 %) + (Sale of april \times 20 %) \\ = & ($ 47, 000 \times 40 %) + ($ 32, 000 \times 30 %) + ($ 50, 000 \times 20 %) \\ = & $ 38, 400 \end{array}$

Cash receipt in the month of July

$\begin{array}{rcl} Cash receipt & = & (Sale of july \times 40 %) + (Sale of june \times 30 %) + (Sale of may \times 20 %) \\ = & ($ 58, 000 \times 40 %) + ($ 47, 000 \times 30 %) + ($ 32, 000 \times 20 %) \\ = & $ 43, 700 \end{array}$

Cash receipt in the month of August

$\begin{array}{rcl} Cash receipt & = & (Sale of august \times 40 %) + (Sale of july \times 30 %) + (Sale of june \times 20 %) \\ = & ($ 62, 000 \times 40 %) + ($ 58, 000 \times 30 %) + ($ 47, 000 \times 20 %) \\ = & $ 51, 600 \end{array}$

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Selling and administrative expenses	$328,000
Depreciation expenses	195,000
Sales	1,660,000
Interest expenses	129,000
Cost of goods sold	560,000
Taxes	171,000

Short Answer

Step by step solution

Cash receipt in the month of March

Cash receipt in the month of April

Cash receipt in the month of May

Cash receipt in the month of June

Cash receipt in the month of July

Cash receipt in the month of August

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March	\(41,000
April	50,000
May	32,000
June	47,000
July	58,000
August	62,000