The following sales budget has been prepared: Collection on credit sales are 50%
ID: 2778852 • Letter: T
Question
The following sales budget has been prepared:
Collection on credit sales are 50% in the month of sale, 40% in the month following sale, and 10% two months following sale. No uncollectible accounts are expected. What is the expected balance of Accounts Receivable at October 31?
A. $110,000
B. $180,000
C. $72,500
D. $118,000
Please let me know how you worked through the problem :(
MONTH Cash Sales Credit Sales September $100,000 $200,000 October $125,000 $180,000 November $207,000 $199,000 December $67,000 $144,000Explanation / Answer
A. $110,000 Statement showing Budget Particulars September October November December Credit Sales 200,000.00 180,000.00 199,000.00 144,000.00 Collection in same month@50% (a) 100,000.00 90,000.00 99,500.00 72,000.00 Collection in same month@40%(b) 80,000.00 72,000.00 79,600.00 Collection in same month@10%(c) 20,000.00 18,000.00 Total collections(a+b+c) 100,000.00 170,000.00 191,500.00 169,600.00 Total credit Sales till October(200000+180000) 380,000.00 Cash collected till October 270,000.00 Accounts receivable at 31 October 110,000.00 OR you can solve by below method Accounts recivable of Sept credit sales(200,000*.10) 20,000.00 Accounts recivable of Octt credit sales(180,000*.50) 90,000.00 Total AR at 31 October 110,000.00