Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.
-The accounts receivable balance, net of uncollectible accounts, at the end of December would be:

Question

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
 Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
  Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
  The cost of goods sold is 80% of sales.
  The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
  Other monthly expenses to be paid in cash are $21,700.
  Monthly depreciation is $17,000.
  Ignore taxes. 
-The accounts receivable balance, net of uncollectible accounts, at the end of December would be:

Quizplus · Accepted Answer

First, we need to calculate the total credit sales for December: 
$230,000 x 100/80 = $287,500 
Then, we need to calculate the total expected collections for December: 
55% x $287,500 (collected in December) + 40% x $287,500 (collected in January) = $181,375 
Finally, we subtract the expected collections from the accounts receivable balance at the end of November: 
$260,000 - $181,375 = $78,625 
However, we also need to consider the 5% uncollectible accounts, so we need to further subtract: 
$78,625 x 5% = $3,931.25 
Therefore, the accounts receivable balance, net of uncollectible accounts, at the end of December is: 
$78,625 - $3,931.25 = $74,693.75 
Rounded to the nearest thousand, the answer is $92,000.

Dilom Farm Supply Is Located in a Small Town in the Rural