The Green Retail store is planning to open new credit department that only makes credit sales. Its budgeted credit sales for the first year by quarter are as follow: Quarter 1, $10,000; Quarter 2, $11,000; Quarter 3, $12,100; and Quarter 4, $13,310. From the company's market study, the credit department will collect its customers' Accounts Receivable balances according to the following pattern: 70% in the quarter of sale, 28% in the following quarter after the sale, and the balance is uncollectible and will be directly written off of the Accounts Receivable balance during the 2^nd following quarter after the sale. What are the budgeted collections on credit sales for quarter 3 of first year?

Question

Quizplus · Accepted Answer

Budgeted Cash Receipts = Budgeted Cash Sales + Budgeted Collections on Credit Sales = $0 + (28% of Q2 Credit Sales + 70% of Q3 Credit Sales) = (28% x $11,000) + (70% x $12,100) = $3,080 + $8,470 = $11,550.

The Green Retail Store Is Planning to Open New Credit