Question

Jericho’s Mediterranean Restaurant is preparing its budgeted balance sheet. The cash receipts budget indicates that net sales in the fourth quarter of 2015 were $36,000. Jericho expects 25% of these sales to be cash. Of the credit sales, it expects 80% to be collected in the quarter of the sale and 20% to be collected in the following quarter. Calculate the amount of accounts receivable that Jericho would report on the budgeted balance sheet at December 31, 2015.

Answer 1

Answer:

$30,600

Explanation:

Accounts receivable should comprise the total amount of cash from sales during the quarter and the amount of credit sales collected during the quarter in question, so the 20% to be collected in the following quarter shouldn't be represented in this budgeted sheet. Assuming that cash and credit payments represent the totality of net sales, accounts receivable for the quarter can be represented as follows:

$AR= 36,000*0.25 + (36,000*0.75*.80)\\AR=30,600$

Jericho would report $30,600 on the budgeted balance sheet.