Meredith Company has budgeted sales for the upcoming months as follows: April$360,000May$372,000June$392,000July$412,000August$400,000September$380,000Forty percent of the sales are credit sales, the remainder are made in cash. Credit sales are collected 50% in the month of sale, 40% in the month following the sale, and 8% in the second month following the sale.a. Compute Meredith Company's cash receipts for June.b. Compute Meredith Company's cash receipts for July.c. Compute Meredith Company's cash receipts for August.
What will be an ideal response?
a. $384,640 = ($392,000 × .60) + ($392,000 × .40 × .50) + ($372,000 × .40 × .40) + ($360,000 × .40 × .08)
b. $404,224 = ($412,000 × .60) + ($412,000 × .40 × .50) + ($392,000 × .40 × .40) + ($372,000 × .40 × .08)
c. $398,464 = ($400,000 × .60) + ($400,000 × .40 × .50) + ($412,000 × .40 × .40) + ($392,000 × .40 × .08)
Cash collections for a month are calculated by multiplying sales revenue for that month by the percentage collected in cash, and also by the percentage of credit sales collected in the month of sale, and adding in the amount to be collected in cash from sales made in prior months.
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