Question

Caba Corporation’s sales budget for the first half of the year is as follows: Budgeted Sales January $ 115,000 February $ 198,000 March $ 220,000 April $ 250,000 May $ 210,000 June $ 290,000 Total: $ 1,283,000 Sales are 30% cash and 70% on account. Sales on account are to be collected over a three-month period, with 20% collected in the month of the sale, 65% collected in the first month following the sale, and 15% collected in the second month following the sale. What is the budgeted balance in the Accounts Receivable account as of June 30?

Answer 1

Answer:

$210,550

Explanation:

The accounts receivable represents the amount yet uncollected from sales made on credit.

Given that sales on account/credit are to be collected in the format;  20% collected in the month of the sale, 65% collected in the first month following the sale, and 15% collected in the second month following the sale and 70% of sales are on account, the  budgeted balance in the Accounts Receivable account as of June 30 will be made of;

• 80% * 70% of sales in June
• 15% * 70% of sales in May

This is equivalent to

80% * 70% * $290,000 + 15% * 70% * $210,000

= $210,550