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Ratchet Manufacturing anticipates total sales for August, September, and October of $170,000,...

Question:

Ratchet Manufacturing anticipates total sales for August, September, and October of $170,000, $180,000, and $190,500 respectively. Cash sales are normally 20% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale.

Compute the amount of accounts receivable to be reported on the company's budgeted balance sheet for August.

a. $136,000.

b. $34,000.

c. $144,000.

d. $36,000.

e. $170,000.

Accounts Receivable:

The organizations in the current market conditions have to sell their merchandise on credit to stay competitive and increase their top-line growth. The goods sold on credit to the customers are debited to accounts receivable and are shown as a current asset item in the balance sheet.

Answer and Explanation:

Provided with following details for accounts receivable

  • The sales August, September, and October are given
  • The sales terms are 20% cash payment and 80% on account
  • The on account sales are collected the following terms

The closing accounts receivable balance for august is calculated as below

August
Opening Accounts receivable (A)
Budgeted Sales revenue (B) $170,000
Schedule of Expected Cash Collections
August sales $34,000
Total cash collections(C) $34,000
Closing Accounts Receivable (A + B - C) $136,000

The amount of accounts receivable to be reported on the company's budgeted balance sheet for August is $136,000, and the answer is A.


Learn more about this topic:

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Accounts Receivable: Definition, Process & Examples

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 1
70K

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