[sortabebe]

Ellis Sport Shop projects the following sales:

April $75,000 May $95,000 June $100,000

Seventy percent of Ellis' sales are on credit with 60 percent of receivables collected in the month after the sale and the rest of receivables collected in the second month after the sale. February sales were $60,000 and March sales were $70,000. In the past Ellis' bad debt percentage has been 0 and is expected to continue.
(a) Prepare a monthly schedule of cash receipts for April-June.
(b) What is the balance of Receivables at the end of June.


Feb Mar April May June
60,000 70,000
60% collected 50,000 60,000

How do I solve this I'm stuck

[Fidget1]

The cash sales schedule is very straightforward. If 70% of sales each month are on credit, the remaining 30% each month must be cash sales. So 30% of total sales each month gives you your cash sales schedule.

The balance on receivables at the end of June is slightly trickier but it's not difficult.

You know that 70% of sales are on credit and 60% of that is paid the following month and the balance month after that.

That means:

Feb's credit sales are paid 60% in March & 40% in April,
March's credit sales paid 60% in April & 40% in May,
May's credit sales paid 60% in June & 40% in July and;
June's credit sales paid 60% in July & 40% in August.

Your question asks what the balance on receivables is at the end of June. So, you know that 40% of May's credit sales aren't due for payment until July, and that June's credit sales aren't due until July & August, so the balance on receivables at the end of June is going to be 40% of May's credit sales + 100% of June's credit sales.