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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 is the budgeted balance of Ross's accounts receivable as of July 31?
A)$375,000
B)$455,000
C)$415,000
D)$396,000

Question

Quizplus · Accepted Answer

To calculate the budgeted balance of accounts receivable as of July 31, we need to first determine the expected collections for June and July sales.

Collections for June sales (70% in June): 
$240,000 x 70% = $168,000

Collections for July sales (70% in July + 20% in August + 10% in September): 
$1,250,000 x 70% = $875,000 (July) 
$1,250,000 x 20% = $250,000 (August) 
$1,250,000 x 10% = $125,000 (September)

Total expected collections: 
$168,000 (June) + $875,000 (July) + $250,000 (August) + $125,000 (September) = $1,418,000

To find the budgeted balance of accounts receivable as of July 31, we subtract expected collections from total sales: 
$1,250,000 (July sales) - $875,000 (expected collections for July sales) = $375,000

$375,000 + $240,000 (June sales) = $615,000

Finally, we need to add the balance of accounts receivable from the previous month (June 30) to get the budgeted balance of accounts receivable as of July 31: 
$615,000 + $400,000 (balance on June 30) = $1,015,000

Therefore, the correct answer is B) $455,000.

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