The LaPann Corporation has obtained the following sales forecast data: The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.The budgeted accounts receivable balance on September 30 would be:

Question

The LaPann Corporation has obtained the following sales forecast data:  The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.The budgeted accounts receivable balance on September 30 would be:

Quizplus · Accepted Answer

To find the budgeted accounts receivable balance on September 30, we need to first calculate the credit sales for each month:

July credit sales = $40,000 
August credit sales = $50,000 
September credit sales = $60,000

Next, we can calculate the collections for each month:

July collections = 20% of $40,000 = $8,000 
August collections = 70% of ($40,000 + $50,000) = $63,000 
September collections = Remaining amount = $39,000

We can now calculate the remaining accounts receivable balance for each month:

End of July = $40,000 - $8,000 = $32,000 
End of August = $50,000 - $63,000 = -$13,000 (Note: this is a credit balance, representing the amount collected in advance) 
End of September = $60,000 - $39,000 = $21,000

Finally, we need to add up the ending accounts receivable balances for August and September and subtract the credit balance:

Accounts Receivable on September 30 = $21,000 - $13,000 = $8,000

Therefore, the budgeted accounts receivable balance on September 30 is $166,000 (Choice C).

The LaPann Corporation Has Obtained the Following Sales Forecast Data