Exhibit 9-2
Bowline Inc.is a distributor which sells one product for $60 per unit.Bowline pays $33 to buy the product.In addition,fixed costs total $42,000 per month.Bowline wishes to maintain an inventory at the end of each month equal to 25% of the next month's projected sales.Purchases are paid in the month after purchase.
Bowline makes all sales on credit and collects 30% in the month of sale and 70% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows:
$\begin{array}{ll}
\text { January } & 20,000 \text { units } \
\text { February } & 25,000 \text { units } \
\text { March } & 28,000 \text { units } \
\text { April } & 30,000 \text { units } \
\text { May } & 26,000 \text { units }
\end{array}$
-Refer to Exhibit 9-2.What will accounts receivable be at the end of February?
A)$450,000
B)$1,500,000
C)$1,050,000
D)$375,000
E)None of the answer choices is correct.

Question

Exhibit 9-2
Bowline Inc.is a distributor which sells one product for $60 per unit.Bowline pays $33 to buy the product.In addition,fixed costs total $42,000 per month.Bowline wishes to maintain an inventory at the end of each month equal to 25% of the next month's projected sales.Purchases are paid in the month after purchase.
Bowline makes all sales on credit and collects 30% in the month of sale and 70% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows:
 $\begin{array}{ll}
\text { January } & 20,000 \text { units } \
\text { February } & 25,000 \text { units } \
\text { March } & 28,000 \text { units } \
\text { April } & 30,000 \text { units } \
\text { May } & 26,000 \text { units }
\end{array}$
-Refer to Exhibit 9-2.What will accounts receivable be at the end of February?
A)$450,000
B)$1,500,000
C)$1,050,000
D)$375,000
E)None of the answer choices is correct.

Quizplus · Accepted Answer

At the end of February, accounts receivable will include 70% of February sales (since 30% is collected in February) and 30% of January sales. February sales are 25,000 units, so 70% of $1,500,000 ($60 x 25,000) is $1,050,000. January sales are 20,000 units, so 30% of $1,200,000 ($60 x 20,000) is $360,000. Total accounts receivable is $1,050,000.

Exhibit 9-2 Bowline Inc -Refer to Exhibit 9-2

Exhibit 9-2
Bowline Inc -Refer to Exhibit 9-2