# McLeod Fries, Inc. has budgeted sales for June and July at $670,000 and$770,000, respectively....

## Question:

McLeod Fries, Inc. has budgeted sales for June and July at $670,000 and$770,000, respectively. Sales are 85% credit, of which 60% is collected in the month of sale and 40% is collected in the following month.

What is the budgeted Accounts Receivable balance on July 31?

a. $308,000 b.$261,800

c. $227,800 d.$654,500

## Accounts Receivable:

When companies sell goods and services on credit, they record the amounts to be collected from customers at a later date with a debit entry to an account titled "accounts receivable." This is a current asset account as management expects to collect receivables within a one year period. When receivables are collected, the cash account is debited and receivables is credited.

The budgeted accounts receivable balance is equal to the 40% of uncollected credit sales for the month.

 July Sales $770,000 Credit Sales Percentage x 85% July Credit Sales$654,500 Percentage Collected in the Following Month x 40% July Accounts Receivable $261,800 The correct answer is b.$261,800