Question

Graham Potato Company has projected sales of $12,600 in September $15.500 in October $22 800 in November, and $18.600 in December of the company's sales, 25 percentare paid for by cash and 75 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 80 percent are paid two months after. Determine collections for November and December Also assume Graham's cash payments for November and December are $19.000 and $11500, respectively. The beginning cash balance in November is $5,000, which is the desired minimum balance a. Prepare a cash receipts schedule for November and December Graham Potato Company Cash Receipts Schedule September October November December Sales Credit sales Cash sales One month after sale Two months after sale Total cash receipts

Answer 1

Calculations	Particulars	Sep	Oct	Nov	Dec
A	Sales	12600	15500	22600	18600
B = A x 75%	Credit Sales	9450	11625	16950	13950
C = A x 25%	Cash Sales	3150	3875	5650	4650
D = B of previous month x 40%	Collections One month after sales		3780	4650	6780
E = B two months back x 60%	Collections Two month after sales			5670	6975
F = C+D+E	Total cash receipt			15970	18405

Explanation for D and E

40% of Collection of credit sales is made one month after sale and remaining 60% two months after sales

So, collection of credit sales of Oct

= 40% in November and 60% in December

In November

= $11,625 x 40%

= $4,650

In December

= $11,625 x 60%

= $6,975