Compton Company expects the following total sales: $$\begin{array} { | l | c | }
\hline \text { Month } & \text { Sales } \
\hline \text { March } & \$ 30,000 \
\hline \text { April } & \$ 20,000 \
\hline \text { May } & \$ 30,000 \
\hline \text { June } & \$ 25,000 \
\hline
\end{array}$$ 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, 68% in the month following the sale with the remainder being uncollectible and written off. The budgeted accounts receivable balance on May 31 is:

Question

Compton Company expects the following total sales: $$\begin{array} { | l | c | } 
\hline \text { Month } & \text { Sales } \
\hline \text { March } & \$ 30,000 \
\hline \text { April } & \$ 20,000 \
\hline \text { May } & \$ 30,000 \
\hline \text { June } & \$ 25,000 \
\hline
\end{array}$$ 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, 68% in the month following the sale with the remainder being uncollectible and written off. The budgeted accounts receivable balance on May 31 is:

Quizplus · Accepted Answer

The budgeted accounts receivable balance on May 31 is $12,240. This is calculated as follows:March sales: $30,000 x 60% = $18,000April sales: $20,000 x 60% = $12,000May sales: $30,000 x 60% = $18,000Total credit sales: $18,000 + $12,000 + $18,000 = $48,000Collections in May: $48,000 x 30% = $14,400Collections in June: $48,000 x 68% = $32,640Total collections: $14,400 + $32,640 = $47,040Accounts receivable balance on May 31: $48,000 - $47,040 = $12,240

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