Question

The regular pattern of collection of credit sales is 40% in the month of sale, 50% in the month following sale, and the remainder in the second month following the month of sale. There are no bad debts. The budgeted accounts receivable balance at the end of February would be: Group of answer choices

Answer 1

Answer:

The answer is $ $250,000

Explanation:

From the question given, we find the budgeted accounts receivable balance at the end of February

Recall from the table,

The Khaki cooperation has the following data sales budgeted

                         January             February         March         April

Cash sales....    $70,000             $90,000        $80,000     $70,000

Credit sales...    $400,000         $350,000     $300,000     $320,000

The budgeted accounts receivables would be in agreement  of the balance amount (10%) for January credit sales will remain undone at the end of February and 60% of the February credit sales.

The formula for calculating the budgeted accounts receivable on February  ending can be derived as follows:

We apply the formula for budgeted accounts receivable on February ending as :

The Accounts  Budgeted Receivable (February ending) = January Credit Sales x 10% + February Credit Sales x 60%

Now,

From the information gotten above, we now have

Budgeted Accounts Receivable (February ) = 400,000 x 10% + 350,000 x 60% = $250,000

It is important to note that,

At the month of January out of the credit sales of $400,00 , 40% will be taken in January itself and 50% will get taken in February. The balance 10% will remain unresolved at February ending.

Also for the month of February,  out of  the credit sales of $350,000 ,40% will be taken or received  in February, and the remainder of 60% will still be   at the end of February.