Question

Crowley Company projects the following sales:

January February March

Cash sales (25%) \( 5,000 \) 5,500 \( 6,000

Sales on account (75%) 15,000 16,500 18,000

Total sales \) 20,000 \( 22,000 \) 24,000

Crowley collects sales on account in the month after the sale. The Accounts Receivable balance on January 1 is \(13,500, which represents December’s sales on account. Crowley projects the following cash receipts from customers:

January February March

Cash receipts from cash sales \) 5,000 \( 5,500 \) 6,000

Cash receipts from sales on account 13,500 15,000 16,500

Total cash receipts from customers \( 18,500 \) 20,500 $ 22,500

Recalculate cash receipts from customers if total sales remain the same but cash sales are only 20% of the total.

Short answer

The cash receipts from customers in the month of January, February, and March is$18,400, $20,400, and $22,400 respectively.

Step-by-step solution

Meaning of Accounts Receivable

Accounts receivable refers to the business entity's sales amount the customers will pay in the future. It is a current asset of the company.

Statement showing projected sales

Particulars	January	February	March
Cash sales (20% of total sales)	$4,000	$4,400	$4,800
Credit sales (80% of total sales)	$16,000	$17,600	$19,200
Total Sales	$20,000	$22,000	$24,000

Step 3: Statement showing the projected cash receipts from customer

Particulars	January	February	March
Cash sales	$4,000	$4,400	$4,800
Credit sales	$14,400	$16,000	$17,600
Total cash receipts from customers	$18,400	$20,400	$22,400

Working note:

Calculation of amount of credit sales of January

$\begin{array}{c}\text{Credit\hspace{0.17em}sales\hspace{0.17em}of\hspace{0.17em}january}=\frac{\$13,500}{75\%}\times 80\%\\ =\$14,400\end{array}$