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Foray Company finds that typically 40% of a month's sales are for cash. Cash collected on accounts receivable are 70% in the month of sale and 30% in the month following sale. Budgeted sales for June are $120,000, for July $160,000, and for August $140,000. What are the total cash receipts budgeted for July?

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Answer:

$152,800

Explanation:

Given that typically 40% of a month's sales are for cash, then Cash collected on accounts receivable are 70% in the month of sale and 30% in the month following sale.

Expected cash receipt for July will include 40% sales in July, 42% (70% * 60%) of sales in July and 18% (30% * 60%) of sales in June

The total cash receipts budgeted for July

= 40% * $160,000 + 42% * $160,000 + 18% * $120,000

= $64,000 + $67,200 + $21,600

= $152,800

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