Question

Orchard has forecast sales to be $132,000 in February, $135,000 in March, $156,000 in April, and $148,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31

Answer 1

Answer:

The budgeted accounts receivables balance on May 31 is $59200.

Explanation:

The accounts receivable balance at May 31 will be equal to the amount of sales that are not paid for yet. The sales made on credit till April will be fully collected in May along with the amount for 60% of Ma's sales will also have been collected.

As 40% of each month's sales balance is collected in the following month, the outstanding balance or the balance of accounts receivables at the end of May will be,

Accounts receivables at 31 May = 0.4 * 148000 = $59200