Business, 27.10.2020 17:20 july00

The company expects 60% of its sales to be credit sales and 40% for cash. Credit sales are collected as follows: 30% in the month of sale, 70% in the month following the sale. The budgeted accounts receivable balance on May 31 is:

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Answer from: glydelxc2780

Hi, the question you posted is incomplete, however i have searched for the full question and it reads as follows :

Compton Company expects the following total sales:

MonthSales

March$30,000

April$20,000

May $30,000

June$25,000

The company expects 60% of Its sales to be credit sales and 40% for cash.

Credit sales are collected as follows:

30% in the month of sale, 68% in the month following the sale with the remainder being uncollectible and written off.

Required:

The budgeted Accounts Receivable balance on May 31 is:

$13,200

Explanation:

Step 1 : Separate Cash and Credit Sales in the Sales Budget

Sales Budget for the Months ended, March, April and May

March April May June

Sales $30,000 $20,000 $30,000 $25,000

Cash Sales ($12,000) ($8,000) ($12,000) ($10,000)

Credit Sales $18,000 $12,000 $18,000 $15,000

Step 2 : Prepare the Trade Receivable Budget considering credit sales only

Trade Receivable Budget for the Months ended, March, April and May

March April May June

Balance b/d $0 $12,600 $8,760 $13200

Credit Sales $18,000 $12,000 $18,000 $15,000

Collection - 30 % ($5,400) ($3,600) ($5,400) ($4,500)

Collection - 68 % $0 ($12,240) ($8,160) ($12,240)

Balance c/f $12,600 $8,760 $13,200 $11,460

Note :

The Trade Receivable Budget forecasts the amounts that will be owed to a business by credit customers

Answer from: Quest

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Answer from: Quest

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