Compton Company expects the following total sales: $$\begin{array} { | c | c | }
\hline \text { Month } & \text { Sales } \
\hline \text { March } & \$ 30,000 \
\hline \text { April } & \$ 20,000 \
\hline \text { May } & \$ 30,000 \
\hline \text { June } & \$ 25,000 \
\hline
\end{array}$$ The company expects 60% of its sales to be credit sales and 40% for cash.Credit sales are collected as follows: 30% in the month of sale,70% in the month following the sale.The budgeted accounts receivable balance on May 31 is:
A) $12,240.
B) $12,600.
C) $20,400.
D) $21,000.

Question

Compton Company expects the following total sales: $$\begin{array} { | c | c | } 
\hline \text { Month } & \text { Sales } \
\hline \text { March } & \$ 30,000 \
\hline \text { April } & \$ 20,000 \
\hline \text { May } & \$ 30,000 \
\hline \text { June } & \$ 25,000 \
\hline
\end{array}$$ The company expects 60% of its sales to be credit sales and 40% for cash.Credit sales are collected as follows: 30% in the month of sale,70% in the month following the sale.The budgeted accounts receivable balance on May 31 is:
A) $12,240.
B) $12,600.
C) $20,400.
D) $21,000.

Quizplus · Accepted Answer

Total budgeted sales = $11,815,000

Credit sales = 60% of $11,815,000 = $7,089,000

Cash sales= 40% of $11,815,000 = $4,726,000

Collections from credit sales in the month of sale = 30% of $7,089,000 = $2,126,700

Collections from credit sales in the month following the sale = 70% of $7,089,000 = $4,962,300

Total collections from credit sales = $7,089,000

Total accounts receivable on May 31 = Collections from credit sales not yet received = ($7,089,000-$2,126,700-$4,962,300) = $0

Therefore, the budgeted accounts receivable balance on May 31 is $0, and none of the given choices is correct.

Compton Company Expects the Following Total Sales The Company Expects 60% of Its Sales to Be Credit