Question

Richards Corporation has the following budgeted sales for the first half of next year: Cash Sales Credit Sales January $80,000 $350,000 February $60,000 $200,000 March $50,000 $145,000 April $45,000 $130,000 May $55,000 $170,000 June $50,000 $150,000The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on credit sales: 60% in month of sale 30% in month following sale 10% in second month following saleThe accounts receivable balance on January 1 is $70,000. Of this amount, $60,000 represents uncollected December sales and $10,000 represents uncollected November sales. What is the budgeted accounts receivable balance on May 30? $141,000 $68,000 $81,000 $60,000

Answer 1

$81,000

Step-by-step explanation:

Accounts Receivable Budget

April Accounts Receivable = 10% x 130,000 = $13,000

May Accounts Receivable = 40% x 170,000 = $68,000

Total Accounts Receivables = $(13,000 + 68,000)

Total Accounts Receivables = $81,000

Note: For April: 60% will be collected in the month of April, 30% will be collected in the month of May. Therefore, 10% of credit sale will be uncollected during May.

For May: 60% will be collected in the month of May; therefore, 40% will be uncollected on the month of May.

For March: 60% will be collected on March, 30% will be collected on April, and 10% will be collected on May. Therefore, there will be no accounts receivable balance for March.