Thread: How do I caculate credit sales?

I am working on this textbook question:

A Ltd's credit sales are collected as follows:

Month of sale - 50%
1st Month after sale - 30%
2nd Month after sale - 15%
Bad Debts - 5%

Budgeted sales data for Jan-April is:

Jan - £100,000

Feb - £160,000
March - £180,000
April - £120,000

What is the amount creveived in April for credit sales ONLY?

In April you get 50% of April sales so 60,000
you also get 30% of Mar sales so 54000
you also get 15% of Feb sales so 24000
Total of 138,000

You don't count the 5% because that is being written off as bad debt. The company is saying that on average 5% of all credit sales will not be collected because the customer will default on them.

Credit sales received in April will be as below...

April - 50% of 120,000 = 60,000
March - 30% of 180,000 = 54,000
Feb - 15% of 160,000 = 24,000

total = 138,000