Marco Limited sells on credit to all its customers. The sales budget shows total budgeted sales for January, February, March and April of £225,000, £240,000, £250,000 and £275,000 respectively. 40% of customers are expected to pay what is owed in the month after the month of sale, 45% are expected to pay two months after the month of sale and 12% are expected to pay three months after the month of sale. 3% of each month's sales are budgeted to become irrecoverable debts which will not be recovered by the company. What is the figure for trade receivables that should appear in Marco Limited's budgeted statement of financial position at 30 April?

Question

Quizplus · Accepted Answer

The correct answer is A.The trade receivables at 30 April will be the sum of the sales for March and April, less the irrecoverable debts for those months, plus the sales for February and March, less the irrecoverable debts for those months, multiplied by 40%, plus the sales for January and February, less the irrecoverable debts for those months, multiplied by 45%.The sales for March and April are £250,000 and £275,000 respectively. The irrecoverable debts for those months are £7,500 and £8,250 respectively.The sales for February and March are £240,000 and £250,000 respectively. The irrecoverable debts for those months are £7,200 and £7,500 respectively.The sales for January and February are £225,000 and £240,000 respectively. The irrecoverable debts for those months are £6,750 and £7,200 respectively.Therefore, the trade receivables at 30 April will be:£250,000 + £275,000 - £7,500 - £8,250 + (£240,000 + £250,000 - £7,200 - £7,500) x 40% + (£225,000 + £240,000 - £6,750 - £7,200) x 45%= £438,050

Marco Limited Sells on Credit to All Its Customers