Shreva Parab owns The Eatery, an affordable restaurant located near tourist attractions in To- ronto. Shreva accepts cash and cheques. Cheques are deposited immediately. The bank charges $0.50 per cheque; the amount per cheque averages $65. Bad cheques that Shreva cannot collect make up 2 percent of cheque revenue.

During a typical month, The Eatery has sales of $75,000. About 75 percent are cash sales. Estimated sales for the next three months are as follows:

July ........................$60,000

August ..................... 75,000

September ................. 80,000

Shreva thinks that it may be time to refuse to accept cheques and to start accepting credit cards. She is negotiating with the credit card companies, and she would start the new policy on July 1. Shreva estimates that with the decrease in sales from the no-cheques policy and the increase in sales from the acceptance of credit cards, the net increase in sales will be 20 percent. The credit card processing service will charge no setup fee, however the following fees and conditions apply:

• Monthly gateway and statement fee totalling $19, paid on the first day of the month.

• Discount fee of 2 percent of the total sale. This is not paid separately; instead, the amount that Shreva receives from each credit sale is reduced by 2 percent. For example, on a credit card sale of $150, the processing company would take $3 and remit a net amount of $147 to Shreva's account.

• Transaction fee of $0.25 per transaction paid at the time of the transaction.

There will be a two-day delay between the date of the transaction and the date on which the net amount will be deposited into Shreva's account. On average, 94 percent of a month's net credit card sales will be deposited into her account that month. The remaining 6 percent will be deposited the next month.

If Shreva adds credit cards, she believes that cash sales will average just 5 percent of total sales, and that the average credit card transaction will be $50.

Required:

1. Prepare a schedule of cash receipts for August and September under the current policy of accepting cheques.

2. Assuming that Shreva decides to accept credit cards and refuse cheques:

a. Calculate revised total sales, cash sales, and credit card sales by month for August and September.

b. Calculate the total estimated number of credit card transactions for August and September.

3. Prepare a schedule of cash receipts for August and September that incorporates the changes in policy.