Feilding Wilderness Outfitters had projected its sales for the first six months

Question

Feilding Wilderness Outfitters had projected its sales for the first six months of 2008 to be as follows. Jan $50,000 Feb $60,000 mar $100,000 April $180,000 May $240,000 June $240,000
Cost of goods sold is 69% of sales. Purchases are made and paid for two moinths prior to the sale.40% of sales are collected in the month following the sale and the remaining 20% in the second month following the sale.Total other cash expenses are $40,000 per month.Teh company's cash balance as of marh 1st 2008 is projected to be $40,000 and the company wants to maintain a minimum cash balance of $15,000. Excess cash will be used to retire short term borrowing if any exists. Feilding has no short term borrowing as of March 1st 2008. Assume that the interest raet on short term borrowing in 1% per month. What is Feildings projected total receipts (collections) for April?

Explanation / Answer

Projected total receipts (collections) for April =

40% of sales are collected in the month of sales =$180,000 (April sales)* .40 = $72,000

40% of sales are collected in the month following the sale = $100,000(march sales)* .40 = $40,000

remaining 20% in the second month following the sale = $60,000(feb sales) * .20 = $12,000

Projected total receipts (collections) for April = $124,000

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