Stickel Company has the following sales budget:
$\begin{array}{lll}\text { Month }&\text { Cash Sales }&\text { Credit Sales }\
\text { September } & \$ 100,000 & \$ 200,000 \
\text { October } & 125,000 & 190,000 \
\text { November } & 207,000 & 199,000 \
\text { December } & 67,000 & 144,000
\end{array}$
Collection of credit sales are 50% in the month of sale,40% in the month following sale,and 10% two months following sale.No uncollectible accounts are expected.What is the expected balance of Accounts Receivable at October 31?
A) $95,000
B) $110,000
C) $115,000
D) $180,000

Question

Quizplus · Accepted Answer

To calculate the expected balance of Accounts Receivable at October 31, we consider the credit sales from September and October, as these are the months affecting the balance at the end of October. From September's credit sales of $200,000, 50% is collected in September, leaving 50% to be collected in later months. In October, 40% of September's credit sales are collected, and 50% of October's credit sales are collected within the same month. The balance at the end of October consists of 10% of September's credit sales (not collected until November) and 50% of October's credit sales (to be collected in the following months).- September credit sales: $200,000  - 10% not collected until November: $20,000- October credit sales: $190,000  - 50% not collected in October: $95,000Adding these amounts gives the expected balance of Accounts Receivable at October 31:$20,000 (from September) + $95,000 (from October) = $115,000

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