Question

The Kaufusi Company has the following budgeted sales: April May June July Credit sales..................................... $ 320,000 $ 300,000 $ 350,000 $ 400,000 Cash sales....................................... $ 70,000 $ 80,000 $ 90,000 $ 70,000 The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts. The budgeted accounts receivable balance on May 31 would be:

Answer 1

Answer: $242,000

Explanation:

Seeing as this is the balance on the 31st of May, it can be assumed that the 60% to be collected in May (being the month following April) from April Credit Sales has already been collected so only 10% remains.

For May, we can assume that the 30% has been collected leaving only 70% still to be collected on the 31st.

Calculating therefore,

April Credit Sales Due 31st of May = 320,000 * 10%

= $32,000

May Credit Sales due 31st of May = 300,000 * 70%

= $210,000

Total on the 31st of May is therefore,

= 32,000 + 210,000

= $242,000

The budgeted accounts receivable balance on May 31 would be $242,000.