Green Company's sales are 20% cash and 80% credit.Of the credit sales, 60% are collected in the month of sale and 30% in the month following the sale.The balance is collected during the following month.Budgeted sales data is as follows: $$\begin{array} { l l }
\text { June } & \$ 300,000 \
\text { July } & \$ 250,000 \
\text { August } & \$ 280,000 \
\text { September } & \$ 310,000
\end{array}$$ How much is total Accounts Receivable at the end of August?

Question

Green Company's sales are 20% cash and 80% credit.Of the credit sales, 60% are collected in the month of sale and 30% in the month following the sale.The balance is collected during the following month.Budgeted sales data is as follows: $$\begin{array} { l l } 
\text { June } & \$ 300,000 \
\text { July } & \$ 250,000 \
\text { August } & \$ 280,000 \
\text { September } & \$ 310,000
\end{array}$$ How much is total Accounts Receivable at the end of August?

Quizplus · Accepted Answer

To calculate the total Accounts Receivable at the end of August, we need to consider the credit sales that have not yet been collected. For August, 10% of the credit sales are uncollected (since 60% + 30% = 90% are collected within the first two months), and for July, 10% of the credit sales are collected in August. June's sales are fully collected by the end of August.- August credit sales: $280,000 * 80% = $224,000. 10% uncollected = $22,400.- July credit sales: $250,000 * 80% = $200,000. 10% collected in August = $20,000.- June's sales are fully collected by the end of August.Total Accounts Receivable at the end of August = $22,400 (August uncollected) + $20,000 (July collected in August) = $42,400. However, this calculation does not match any of the provided options, indicating a misunderstanding in the explanation process. Let's correct the approach:Correct Calculation:- For August, only the sales from July and August will contribute to the Accounts Receivable at the end of August.- July's remaining 10% to be collected in August: $250,000 * 80% * 10% = $20,000.- August's uncollected sales (60% collected in the same month, 30% in the next month, leaving 10% for later): $280,000 * 80% * 10% = $22,400.The correct calculation should consider the uncollected portions from both July and August sales, which are influenced by the credit terms. The initial explanation incorrectly calculated the total Accounts Receivable by not accurately accounting for the portions of sales collected in different months. The correct answer should reflect the sum of uncollected credit sales by the end of August, considering the sales patterns and collection percentages provided. Given the misunderstanding in the initial explanation, the correct approach involves recalculating based on the provided data and the sales collection pattern.

Green Company's Sales Are 20% Cash and 80% Credit How Much Is Total Accounts Receivable at the End of Credit