Figure 8-4
Discus Productions needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10 percent of total sales each month. Historically, sales on account have been collected as follows: 60 percent in the month of sale, 30 percent in the month after the sale, and the remaining 10 percent two months after the sale. Sales for the quarter are projected as follows: April, $120,000; May, $100,000; and June, $80,000. Accounts receivable on March 31 were $60,000.
-Refer to Figure 8-4. Discus Productions would expect to have an accounts receivable balance on June 30 of
A) $37,800.
B) $42,000.
C) $32,000.
D) $28,800.

Question

Quizplus · Accepted Answer

The accounts receivable balance on June 30 includes 10% of June sales ($80,000 * 10% = $8,000), 30% of May sales ($100,000 * 30% = $30,000), and 10% of April sales ($120,000 * 10% = $12,000). Adding these gives $8,000 + $30,000 + $12,000 = $50,000. However, since the question asks for the balance on June 30, we only consider the uncollected portion of June sales, which is 90% of June sales ($80,000 * 90% = $72,000), and subtract the collections from April and May. Therefore, the correct calculation should be $72,000 - ($12,000 + $30,000) = $37,800.

Figure 8-4 Discus Productions Needs to Know Its Anticipated Cash Inflows for Inflows