John Company has the following sales budget:
$\begin{array}{lll}\text { Month }&\text { Cash Sales }&\text { Credit Sales }\
\text { September } & \$ 100,000 & \$ 200,000 \
\text { October } & 125,000 & 180,000 \
\text { November } & 130,000 & 210,000 \
\text { December } & 135,000 & 190,000
\end{array}$
Collections 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 in Accounts Receivable at December 31?
A) $95,000
B) $116,000
C) $190,000
D) $210,000

Question

Quizplus · Accepted Answer

To calculate the expected balance in Accounts Receivable at December 31, we need to consider the uncollected portions of credit sales from October, November, and December. For October, 50% is collected in October, leaving 50% to be collected in the following months. For November, 50% is collected in November, and 40% in December, leaving 10% uncollected by December 31. December's credit sales are only partially collected (50% in December), leaving 50% uncollected by December 31.October's uncollected credit sales by December 31: $180,000 * 10% = $18,000November's uncollected credit sales by December 31: $210,000 * 10% = $21,000December's uncollected credit sales by December 31: $190,000 * 50% = $95,000Total expected balance in Accounts Receivable at December 31 = $18,000 + $21,000 + $95,000 = $134,000. However, since this option is not available and there seems to be a mistake in my calculation based on the provided options, let's correct the approach based on the given options and the correct method to calculate:Correct calculation:- October (40% of $180,000) = $72,000- November (50% of $210,000 + 40% of $210,000) = $105,000 + $84,000 = $189,000 (But only 10% is uncollected by December, which was incorrectly added before)- December (50% of $190,000) = $95,000The correct calculation should focus on the amounts that remain uncollected by December 31, which are:- From October: 40% of $180,000 = $72,000 (collected in November, so fully collected by December)- From November: 10% of $210,000 = $21,000 (uncollected by December)- From December: 50% of $190,000 = $95,000 (uncollected by December)Thus, the correct expected balance in Accounts Receivable at December 31 should be the sum of uncollected amounts from November and December sales, which is $21,000 + $95,000 = $116,000.

John Company Has the Following Sales Budget Collections of Credit Sales Are 50% in the Month of }&\text