Final answer:
To find the budgeted sales on account for April at Big Wheel, Inc., we used the given collection percentages and the total receipts from sales in April. By setting up and solving an equation, we determined the budgeted sales on account for April to be $200,000.
Step-by-step explanation:
To calculate the budgeted sales on account for April at Big Wheel, Inc., we need to reverse-engineer the receipts from sales on account in April using the given percentages for collection. Big Wheel collects 25% of sales in the month of sale and 75% in the following month.
The company collected $162,500 in April, which represents 75% of March sales ($150,000) plus 25% of April sales. Therefore, we can set up the following equation where x is the April sales:
0.75 × $150,000 + 0.25 × x = $162,500
Solving for x (April budgeted sales), we get:
0.25 × x = $162,500 - (0.75 × $150,000)
0.25 × x = $162,500 - $112,500
0.25 × x = $50,000
x = $50,000 / 0.25
x = $200,000
Therefore, the budgeted sales on account for April are $200,000.