Fortune Inc.has budgeted sales for June and July at $680,000 and $720,000, respectively.Sales are 80% credit, of which 70% is collected in the month of sale and 30% is collected in the following month.What is the accounts receivable balance on July 31?

Question

Quizplus · Accepted Answer

Step 1: Calculate credit sales for each month 
Credit sales in June = $680,000 x 80% = $544,000 
Credit sales in July = $720,000 x 80% = $576,000

Step 2: Calculate the amount collected for June and July sales 
Amount collected for June sales: 
- 70% collected in the same month = $544,000 x 70% = $380,800 
- 30% collected in the following month = $576,000 x 30% = $172,800 
Total amount collected for June sales = $380,800 + $172,800 = $553,600

Amount collected for July sales: 
- 70% collected in the same month = $576,000 x 70% = $403,200

Step 3: Calculate the accounts receivable balance on July 31 
Accounts receivable balance on July 31 = Total credit sales - Amount collected 
= ($544,000 + $576,000) - ($553,600 + $403,200) 
= $1,120,000 - $956,800 
= $163,200

Therefore, the accounts receivable balance on July 31 is $172,800 (Choice C).