Question

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

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

Formula used for calculating the monthly cash receipts

$\mathbf{M}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{h}\mathbf{l}\mathbf{y}\mathbf{}\mathbf{s}\mathbf{a}\mathbf{l}\mathbf{e}\mathbf{s}\mathbf{=}\mathbf{15}\mathbf{\%}\mathbf{\times }\mathbf{P}\mathbf{r}\mathbf{e}\mathbf{s}\mathbf{e}\mathbf{n}\mathbf{t}\mathbf{}\mathbf{m}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{h}\mathbf{}\mathbf{s}\mathbf{a}\mathbf{l}\mathbf{e}\mathbf{s}\mathbf{+}\mathbf{85}\mathbf{\%}\mathbf{\times }\mathbf{P}\mathbf{r}\mathbf{i}\mathbf{o}\mathbf{r}\mathbf{}\mathbf{m}\mathbf{o}\mathbf{n}\mathbf{t}\mathbf{h}\mathbf{}\mathbf{s}\mathbf{a}\mathbf{l}\mathbf{e}\mathbf{s}$

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