Question

Esquire Products Inc. expects the following monthly sales:

January	\(28,000
February	\)19,000
March	\(12,000
April	\)14,000
May	\(8,000
June	\)6,000
July	\(22,000
August	\)26,000
September	\(29,000
October	\)34,000
November	\(42,000
December	\)24,000
Total annual sales	\(264,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for \)2 each and produces them for \(1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

b. Determine a cash receipts schedule for January through December. Assume that dollar sales in the prior December were \)20,000. Work part b using dollars.

Short answer

The cash received in January is $23,200 and in December is $34,800.

Step-by-step solution

Formula used for calculating the monthly cash receipts

$\mathit{M}\mathit{o}\mathit{n}\mathit{t}\mathit{h}\mathit{l}\mathit{y}\mathbf{}\mathit{C}\mathit{a}\mathit{s}\mathit{h}\mathbf{}\mathit{r}\mathit{e}\mathit{c}\mathit{e}\mathit{i}\mathit{p}\mathit{t}\mathit{s}\mathbf{=}\mathbf{40}\mathbf{\%}\mathbf{\times }\mathit{P}\mathit{r}\mathit{e}\mathit{s}\mathit{e}\mathit{n}\mathit{t}\mathbf{}\mathit{m}\mathit{o}\mathit{n}\mathit{t}\mathit{h}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}\mathbf{+}\mathbf{60}\mathbf{\%}\mathbf{\times }\mathit{P}\mathit{r}\mathit{i}\mathit{o}\mathit{r}\mathbf{}\mathit{m}\mathit{o}\mathit{n}\mathit{t}\mathit{h}\mathit{s}\mathbf{}\mathit{s}\mathit{a}\mathit{l}\mathit{e}\mathit{s}$

Cash receipts schedule

Month	January	February	March	April	May	June
Sales	$28,000	$19,000	$12,000	$14,000	$8,000	$6,000
40% cash sales	$11,200	$7,600	$4,800	$5,600	$3,200	$2,400
60% prior month sales	$12,000	$16,800	$11,400	$7,200	$8,400	$4,800
Total cash receipts	$23,200	$24,400	$16,200	$12,800	$11,600	$7,200

Month	July	August	September	October	November	December
Sales	$22,000	$26,000	$29,000	$34,000	$42,000	$24,000
40% cash sales	$8,800	$10,400	$11,600	$13,600	$16,800	$9,600
60% prior month sales	$3,600	$13,200	$15,600	$17,400	$20,400	$25,200
Total cash receipts	$12,400	$23,600	$27,200	$31,000	$37,200	$34,800