# Ross Corporation makes all sales on account. The June 30th balance sheet balance in its accounts...

## Question:

Ross Corporation makes all sales on account. The June 30th balance sheet balance in its accounts receivable is $350,000, of which$240,000 pertain to sales that were made during June. Budgeted sales for July are $1,200,000. Ross collects 70% of sales in the month of sale; 20% in the following month; and the final 10% in the second month after the sale. What are Ross's budgeted collections for July? A.$998,000.

B. $1,110,000. C.$1,080,000.

D. $899,000. ## Cash Collections Estimating future credit sales collections is based on the amount of prior credit sales, the amount of those sales, terms of sale and customer paying habits. ## Answer and Explanation: The answer is B.$1,100,000.

Using the accounts receivable balance of $350,00 determine prior months sales based on collections percentages: June Sales.$240,000/.3=$800,000 (20%+10%) May Sales.$110,000/.1=$1,100,000 See the following table. $840,000 $160,000$110,000 $1,110,000 May June July Credit Sales 100.0%$1,100,000 $800,000$1,200,000 Current Month 70.0% $770,000$560,000 Month Following 20.0% \$220,000 Second Month 10.0% Collections