The Johann's Professional Service Company expects 70% of sales for cash and 30% on credit. The company collects 80% of its credit sales in the month following sale, 15% in the second month following sale, and 5% are not collected (that is, they are "bad debts"). Expected sales for June, July, and August are $48,000, $54,000, and $44,000, respectively. What are the company's expected total cash receipts in August?
What will be an ideal response?
$45,920
Total budgeted cash receipts in August = Cash sales in August + Collection in August of a portion of credit sales made in July + Collection in August of a portion of credit sales made in June = ($44,000 × 0.7) + ($54,000 × 0.3 × 0.8) + ($48,000 × 0.3 × 0.15) = $30,800 + $12,960 + $2,160 = $45,920.
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