Ellis Sport Shop projects the following sales: April 75,000 May 95,000 June 110,

Question

Ellis Sport Shop projects the following sales:

April 75,000 May 95,000 June 110,000

Ninety percent of Ellis' sales are on credit with 60 percent of receivables collected in the month after the sale and the rest of receivables collected in the second month after the sale. February sales were $60,000 and March sales were $70,000. In the past Ellis' bad debt percentage has been 0 and is expected to continue.

a) Prepare a monthly schedule of cash receipts for April-June.
b) What is the balance of Receivables at the end of June?

Explanation / Answer

a) cash receipts for April =$60,000*.1*.4 + $70,000*.1*.6 + 75,000*.9 = $74,100 cash receipts for May = $70,000*.1*.4 +75,000*.1*.6 + 95,000*.9 =$92,800 cash receipts for June = 75,000*.1*.4 +95,000*.1*.6 + 110,000*.9 = $107,700 b) balance of Receivables at the end of June = Receivable for May +Receivable for June = 95,000*.1*.4 +110,000*.1 =14800

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