Question

The records of Morgantown, Inc.show the following forecasted sales: Month Sales September $400,000 October 500,000 November 300,000 December 200,000 Collection pattern: 60 percent in month of sale 40 percent in month following the sale Accounts receivable as of August 31 $70,000 Finished goods inventory as of August 31 8,000 units The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of next month's sales. How much is Accounts Receivable as of October 31?

Answer 1

$460,000

Step-by-step explanation:

Sales:

September = $400,000

October = $500,000

Collection pattern:

60 percent in month of sale

40 percent in month following the sale

Accounts Receivable as of October 31:

= 60 percent of October sales + 40 percent of September sales

= 0.6 × $500,000 + 0.4 × $400,000

= $300,000 + $160,000

= $460,000