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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

Expert verified

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

Step by step solution

01

Formula used for calculating the monthly cash receipts

MonthlyCashreceipts=40%×Presentmonthsales+60%×Priormonthssales

02

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

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