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Chapter 3: Q20BP (page 189)

Eastern Auto Parts Inc. has 15 percent of its sales paid for in cash and 85 percent on credit. All credit accounts are collected in the following month. Assume the following sales:

January

\(65,000

February

\)55,000

March

\(100,000

April

\)45,000

Sales in December of the prior year were $75,000. Prepare a cash receipts schedule for January through April.

Short Answer

Expert verified

The cash receipts will be $73,500 in January, $63,500 in February, $61,750 in March, and $91,750 in April.

Step by step solution

01

Formula used for calculating the monthly cash receipts

Monthlysales=15%×Presentmonthsales+85%×Priormonthsales

02

Cash receipts schedule

Month

January

February

March

April

Sales

$65,000

$55,000

$100,000

$45,000

15% cash sales

$9,750

$8,250

$15,000

$6,750

85% prior month sales

$63,750

$55,250

$46,750

$85,000

Total cash receipts

$73,500

$63,500

$61,750

$91,750

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