(Appendix 10A) Taft Corporation collects cash from customers as follows: 60% in the month of sale, 20% in the month after sale, 19% in the second month after sale, and 1% is never collected. Bad debts are written off annually in December. Budgeted sales are all on credit and amount to: $$\begin{array} { l r }
\text { May } & \$ 600,000 \
\text { June } & 700,000 \
\text { July } & 500,000 \
\text { August } & 600,000
\end{array}$$ What is the budgeted amount of accounts receivable at the end of August?
A) $353,000
B) $340,000
C) $329,000
D) $377,000

Question

(Appendix 10A) Taft Corporation collects cash from customers as follows: 60% in the month of sale, 20% in the month after sale, 19% in the second month after sale, and 1% is never collected. Bad debts are written off annually in December. Budgeted sales are all on credit and amount to: $$\begin{array} { l r } 
\text { May } & \$ 600,000 \
\text { June } & 700,000 \
\text { July } & 500,000 \
\text { August } & 600,000
\end{array}$$ What is the budgeted amount of accounts receivable at the end of August?
A) $353,000
B) $340,000
C) $329,000
D) $377,000

Quizplus · Accepted Answer

The budgeted amount of accounts receivable at the end of August is $353,000. This is calculated as follows:May sales: $600,000 x 60% = $360,000June sales: $700,000 x 60% = $420,000July sales: $500,000 x 60% = $300,000August sales: $600,000 x 60% = $360,000Total sales: $360,000 + $420,000 + $300,000 + $360,000 = $1,440,000Accounts receivable at the end of August:May sales: $360,000 x 20% = $72,000June sales: $420,000 x 20% = $84,000July sales: $300,000 x 20% = $60,000August sales: $360,000 x 20% = $72,000Total accounts receivable: $72,000 + $84,000 + $60,000 + $72,000 = $353,000