Lee's Appliances forecasts the following sales figures for the next four months.
Cash sales average 10 per cent of total sales and credit sales are collected 50 per cent in the month of sale and 50 per cent in the month following sale. What is Lee's estimated accounts receivable balance on July 31?

Question

Lee's Appliances forecasts the following sales figures for the next four months. 
Cash sales average 10 per cent of total sales and credit sales are collected 50 per cent in the month of sale and 50 per cent in the month following sale. What is Lee's estimated accounts receivable balance on July 31?

Quizplus · Accepted Answer

First, we need to calculate the total credit sales for each month:
- May: $80,000 x 90% = $72,000 total credit sales
- June: $120,000 x 90% = $108,000 total credit sales
- July: $100,000 x 90% = $90,000 total credit sales
- August: $90,000 x 90% = $81,000 total credit sales

Next, we need to calculate the accounts receivable balance for each month:
- May: $72,000 x 50% = $36,000 accounts receivable balance
- June: $108,000 x 50% + $36,000 = $90,000 accounts receivable balance
- July: $90,000 x 50% + $81,000 = $126,000 accounts receivable balance
- August: $81,000 x 50% + $90,000 = $126,000 accounts receivable balance

Therefore, the estimated accounts receivable balance on July 31 is $126,000, which is closest to option D ($67,500).

Lee's Appliances Forecasts the Following Sales Figures for the Next