Copyright

The Kafusi Company has the following budgeted sales: The regular pattern of collection of credit...

Question:

The Kafusi Company has the following budgeted sales:

April May June July
Credit Sales 320,000 300,000 350,000 400,000
Cash Sales 70,000 80,000 90,000 70,000

The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month following the month of sale, and the remainder in the second month following the month of sale.

There are no bad debts.

The budgeted accounts receivable balance on May 31 would be:

a) $180,000

b) $210,000

c) $242,000

Account Receivable:

Account receivables are the current assets of the business which are representing the total debtors of the business. They are the customers to whom the business as provided goods or services in credit and their amount is pending to be paid. Ones the account receivable will pay the cash will be received.

Answer and Explanation:


The correct answer is option c) $242000

Explanation

Account Receivable on May 31 = 10% of credit sale of April (because only 30% collected in April and 60% in May) + 70% of credit sale of May (because only 30% collected in May)

Account Receivable on May 31 = $320000 * 10% + $300000 * 70% => $32000 + $210000 = $242000


Learn more about this topic:

Loading...
Accounts Receivable: Definition, Process & Examples

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 1
70K

Related to this Question

Explore our homework questions and answers library