Question

Crocetti Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Budgeted selling price per unit $ 121 Budgeted unit sales (all on credit): January 7,000 February 7,500 March 11,900 April 14,900Credit sales are collected: 40% in the month of the sale 60% in the following month The budgeted accounts receivable balance at the end of February is closest to:_________.
a) $544,500
b) $907,500
c) $605,000
d) $363,000

Answer 1

Answer:

a) $544,500

Explanation:

Account receivable represents sales on credit or account yet to be collected.

Considering the company's cash collection system; 40% in the month of the sale 60% in the following month , it means that the accounts receivable balance (amount of credit sales yet to be collected) at the end of February would be the 60% portion of credit sales for February. This is

= 60% * $121 * 7500

= $544,500