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28 July, 00:35

Getty Company expects sales for the first three months of next year to be $200,000, $235,000, and $298,000, respectively. Getty expects 35 percent of its sales to be cash and the remainder to be credit sales. The credit sales will be collected as follows: 60 percent in the month of the sale and 40 percent in the following month. Prepare a schedule of Getty's cash receipts for the months of February and March.

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  1. 28 July, 00:43
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    Getty's cash receipts for the months of February: $225,900

    Getty's cash receipts for the months of March: $281,620

    Explanation:

    Cash sales:

    In January = 35% x $200,000 = $70,000

    In February = 35% x $235,000 = $82,250

    In March = 35% x $298,000 = $104,300

    Credit Sales:

    In January = 65% x $200,000 = $130,000

    In February = 65% x $235,000 = $152,750

    In March = 65% x $298,000 = $193,700

    Getty's cash receipts for the months of February = Cash sales of February + 40% x Credit sales of January + 60% x Credit sales of February = $82,250 + 40% x $130,000 + 60% x $152,750 = $225,900

    Getty's cash receipts for the months of March = Cash sales of March + 40% x Credit sales of February + 60% x Credit sales of March = $104,300 + 40% x $152,750 + 60% x $193,700 = $281,620
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