The Kafusi Company has the following budgeted sales:$\begin{array}{lrr}
&\text { April}&\text { May}&\text { June}&\text { July }\
\text { Credit Sales } &£ 320,000& £ 300,000& £ 350,000 &£ 400,000\
\text { Cash Sales } &£ 70,000 &£ 80,000& £ 90,000& £ 70,000\
\end{array}$

The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.
- The budgeted accounts receivable balance on May 31 would be

A)£210,000
B)£212,000
C)£180,000
D)£242,000

Question

The Kafusi Company has the following budgeted sales:$\begin{array}{lrr}
&\text { April}&\text {  May}&\text {  June}&\text {  July }\
  \text { Credit Sales } &£ 320,000& £ 300,000& £ 350,000 &£ 400,000\
 \text { Cash Sales } &£ 70,000 &£ 80,000& £ 90,000& £ 70,000\
\end{array}$

The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.
- The budgeted accounts receivable balance on May 31 would be

A)£210,000
B)£212,000
C)£180,000
D)£242,000

Quizplus · Accepted Answer

To calculate the budgeted accounts receivable balance on May 31, we need to consider the credit sales for April and May and how they are collected based on the given pattern. For April's credit sales of £320,000, 30% is collected in April, 60% in May, and the remainder in June. For May's credit sales of £300,000, 30% is collected in May, and the remaining amounts will be collected in the following months. Therefore, on May 31, the accounts receivable will include 60% of April's credit sales and 70% (the sum of 60% and 10% remaining) of May's credit sales: (0.60 * £320,000) + (0.70 * £300,000) = £192,000 + £210,000 = £402,000. However, this calculation does not align with the provided options, indicating a mistake in my explanation. Let's correct this: On May 31, the accounts receivable will indeed include 60% of April's credit sales and 70% of May's credit sales, but the correct calculation is (0.60 * £320,000) + (0.30 * £300,000) = £192,000 + £90,000 = £282,000. This also does not match the provided options, indicating another mistake in the recalculation. The correct approach is to calculate 60% of April's credit sales and 30% of May's credit sales that have not yet been collected by the end of May: (0.60 * £320,000) + (0.30 * £300,000) = £192,000 + £90,000 = £282,000. This calculation still does not align with the options, indicating a persistent error in my explanation. The correct calculation should consider only the amounts from April and May that are outstanding by May 31, without mistakenly adding or misinterpreting the percentages. Let's accurately address the calculation based on the pattern of collection: For April's credit sales, 60% is collected in May, leaving 10% for June. For May's credit sales, 30% is collected in May, with 60% for June and 10% for July. Correctly, on May 31, the accounts receivable consists of 10% of April's sales and 70% of May's sales: (0.10 * £320,000) + (0.70 * £300,000) = £32,000 + £210,000 = £242,000.

The Kafusi Company Has the Following Budgeted Sales The Regular Pattern of Collection of Credit Sales Is 30