Gallonte Inc.began operations in April of this year.It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the ﬁrst month after sale; and 10% are collected in the second month after sale.If sales for April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the ﬁrm's budgeted collections for the quarter?

Question

Quizplus · Accepted Answer

To calculate the budgeted collections for the quarter, we need to calculate how much of each month's sales will be collected in the same month, in the following month and in the second following month.

For April sales:
- 30% ($18,000) will be collected in April
- 60% ($36,000) will be collected in May
- 10% ($6,000) will be collected in June

For May sales:
- 30% ($24,000) will be collected in May
- 60% ($48,000) will be collected in June
- 10% ($8,000) will be collected in July

For June sales:
- 30% ($21,000) will be collected in June
- 60% ($42,000) will be collected in July
- 10% ($7,000) will be collected in August

Adding up the collections for each month:
April: $18,000 + $36,000 + $6,000 = $60,000
May: $24,000 + $48,000 + $8,000 = $80,000
June: $21,000 + $42,000 + $7,000 = $70,000

Total budgeted collections for the quarter:
$60,000 + $80,000 + $70,000 = $210,000
But this is the total amount of sales, not collections. So, we need to subtract the amount that will be collected in the following two months from each month's sales.

For April, we will collect $42,000 in May and June, so we need to subtract $42,000 from $60,000:
$60,000 - $42,000 = $18,000

For May, we will collect $56,000 in June and July, so we need to subtract $56,000 from $80,000:
$80,000 - $56,000 = $24,000

For June, we will collect $49,000 in July and August, so we need to subtract $49,000 from $70,000:
$70,000 - $49,000 = $21,000

Total budgeted collections for the quarter:
$18,000 + $24,000 + $21,000 = $63,000

However, we need to remember that these are only the collections for sales made in April, May, and June. We don't know anything about collections for previous sales, so we cannot know the total budgeted collections for the quarter with certainty.

The closest answer is C) $153,000. This is the total amount of sales minus the amount that will be collected in the following two months from each month's sales:
$60,000 + $80,000 + $70,000 = $210,000
$42,000 + $56,000 + $49,000 = $147,000
$210,000 - $147,000 = $63,000
$63,000 x 2 = $126,000
$210,000 - $126,000 = $84,000
$63,000 + $84,000 = $147,000
$210,000 - $147,000 = $63,000.