Parvis makes all sales on account, subject to the following collection pattern: 20% are collected in the month of sale; 70% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for October, November, and December were $70,000, $60,000, and $50,000, respectively, what was the budgeted receivables balance on December 31?

Question

Quizplus · Accepted Answer

The budgeted receivables balance on December 31 includes 10% of October sales ($70,000 * 10% = $7,000), 70% of November sales ($60,000 * 70% = $42,000), and 80% of December sales ($50,000 * 80% = $40,000). However, since the question asks for the receivables balance, it should only include amounts not yet collected by December 31, which are 10% of November sales and 80% of December sales, totaling $46,000 ($6,000 + $40,000).

Parvis Makes All Sales on Account, Subject to the Following