Question

Kuzma​ Foods, Inc. has budgeted sales for June and July at $ 680 comma 000.00 and $ 720 comma 000.00​, respectively. Sales are 85​% ​credit, of which 60​% is collected in the month of sale and 40​% is collected in the following month. What is the budgeted Accounts Receivable balance on July​ 31?

Answer 1

Answer:

The budgeted Accounts Receivable balance on July​ 31 is $ 244,800.

Explanation:

Since the company sells 85% credit of which 60% is collected in the month of sale and 40% in the following month. This implies that where the sales for the month of June is $ 680,000, all of the credit sales for the month of June would have been collected by 31 July. Hence no receivables will be budgeted for considering June sales by 31 July.

For sales to be made in July budgeted at $ 720,000, 85% will be credit sales

This amounts to

Credit sales for July = 85% of 720000

                                  = $\frac{85 * 720000}{100}$

                                  = $ 612,000

60% of the credit sales in the month of July will be collected by 31 July while 40% will be collected in the following month hence,

Accounts Receivable balance on July​ 31

= 40% of 612000

= $\frac{40 * 612000}{100}$

= $ 244,800