Earthie’s Shoes has 55% of its sales in cash and the remainder on credit. Of the credit sales, 70% is collected in the month of sale, 15% is collected the month after the sale, and 10% is collected the second month after the sale. How much cash will be collected in June if sales are estimated as $75,000 in April, $65,000 in May, and $90,000 in June?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
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Chapter7: Budgeting
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Problem 14EB: Earthies Shoes has 55% of its sales in cash and the remainder on credit. Of the credit sales, 70% is...
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Earthie’s Shoes has 55% of its sales in cash and the remainder on credit. Of the credit sales, 70% is collected in the month of sale, 15% is collected the month after the sale, and 10% is collected the second month after the sale. How much cash will be collected in June if sales are estimated as $75,000 in April, $65,000 in May, and $90,000 in June?

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The cash receipts are different from the sales revenue because some part of sales are made in cash and some are on credit. The credit sales are realized on different point of time due to which cash realizations are different from the sales revenue of the period.

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