The following sales budget has been prepared: Collections of credit sales are 50% in the month of sale,40% in the month following sale,and 10% two months following sale.No uncollectible accounts are expected.What is the expected balance in Accounts Receivable at November 30?
A)$77,500
B)$105,000
C)$123,000
D)$210,000

Question

The following sales budget has been prepared:  Collections of credit sales are 50% in the month of sale,40% in the month following sale,and 10% two months following sale.No uncollectible accounts are expected.What is the expected balance in Accounts Receivable at November 30?
A)$77,500 
B)$105,000 
C)$123,000 
D)$210,000

Quizplus · Accepted Answer

To calculate the balance in accounts receivable at November 30, we need to calculate the total credit sales made in September and October (as these are the sales whose collections will be made in November).

Total credit sales in September = $280,000 (given)
Total credit sales in October = $330,000 (given)
Total collections in November from September sales = $140,000 (50% of September sales)
Total collections in November from October sales = $132,000 (40% of October sales)
Total collections in December from September sales = $112,000 (40% of September sales)
Total collections in December from October sales = $132,000 (40% of October sales)
Total collections in January from September sales = $28,000 (10% of September sales)
Total collections in January from October sales = $33,000 (10% of October sales)

So, the total expected collections for September and October sales would be $504,000, leaving a balance of $106,000 in accounts receivable at November 30. Therefore, the correct answer is option C ($123,000).

The Following Sales Budget Has Been Prepared: Collections of Credit