Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are collected in the second month. Compute the amount of accounts receivable reported on the company's budgeted balance sheet for June 30.

Question

Quizplus · Accepted Answer

The first step is to calculate the expected credit sales for each month:

April credit sales = $600,000 (75% of $800,000) 
May credit sales = $675,000 (75% of $900,000) 
June credit sales = $712,500 (75% of $950,000)

Then, we need to calculate the collections for each month:

April collections = $150,000 (30% of April sales) 
May collections = $318,750 (30% of April sales + 65% of May sales) 
June collections = $668,625 (30% of April sales + 65% of May sales + 5% of June sales)

Finally, we can calculate the accounts receivable balance for June 30:

June 30 accounts receivable = June credit sales - May and June collections = $712,500 - $318,750 - $668,625 = $496,875

Therefore, the answer is D.

Kent Company Anticipates Total Sales for April, May, and June