Question

The Kafusi Company has the following budgeted sales:

The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month following
the month of sale, and the remainder in the second month following the month of sale. There are no bad
debts.The budgeted accounts receivable balance on May 31 would be:
A. $210,000
B. $212,000
C. $180,000
D. $242,000

Answer 1

The budgeted accounts receivable balance on May 31 would be $212,000. The credit sales and collection percentages are used to calculate the accounts receivable balance in each month. By applying the given collection percentages to the credit sales, we can determine the budgeted accounts receivable balance on May 31.

Step-by-step explanation:

The budgeted accounts receivable balance on May 31 would be $212,000.

To calculate the budgeted accounts receivable balance, we need to calculate the credit sales for each month and apply the given collection percentages. In the month of sale, the credit sales are $200,000. So, 30% of $200,000 is collected, which is $60,000. In the month following the month of sale, the credit sales are $210,000. So, 60% of $210,000 is collected, which is $126,000. The remaining sales, $220,000, are collected in the second month following the month of sale. Therefore, the budgeted accounts receivable balance on May 31 is $60,000 + $126,000 + $220,000 = $406,000. However, we need to subtract the collection in May to get the balance on May 31. 30% of $210,000 is collected in May, which is $63,000. Therefore, the budgeted accounts receivable balance on May 31 is $406,000 - $63,000 = $343,000.