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Ross Corporation makes all sales on account.The June 30th balance sheet balance in its accounts receivable is $400,000,of which $240,000 pertain to sales that were made during June.Budgeted sales for July are $1,250,000.Ross collects 70% of sales in the month of sale;20% in the following month;and the final 10% in the second month after the sale.
-What are Ross's budgeted collections for July?
A)$1,275,000
B)$939,000
C)$1,195,000
D)$915,000

Question

Quizplus · Accepted Answer

Ross's budgeted collections for July include 70% of July sales, 20% of June sales, and 10% of sales from months before June. July sales = $1,250,000. 70% of July sales = $1,250,000 * 70% = $875,000. 20% of June sales ($240,000) = $240,000 * 20% = $48,000. The remaining 10% from sales before June is not explicitly given, but since the total accounts receivable is $400,000 and $240,000 is from June, then $160,000 is from before June. 10% of this amount = $160,000 * 10% = $16,000. Adding these up: $875,000 (July) + $48,000 (June) + $16,000 (before June) = $939,000. However, this calculation seems to have an error in interpreting the final 10% collection, which should not be added as it pertains to the period before the current and next month's collections. The correct calculation focuses on the current and immediate past month's collections only. Therefore, the correct calculation for budgeted collections for July should only consider the 70% of July sales and 20% of June sales, which are correctly calculated as part of the $939,000. The error in the explanation involves misunderstanding the collection pattern and incorrectly adding an amount for the "before June" sales, which should not factor into the July collections based on the given pattern. The correct answer reflects the sum of 70% of July's sales and 20% of June's sales without incorrectly adding extra amounts.

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