Final answer:
To calculate the amount the firm collected in May, subtract 60 days from May 31st to find the starting date, then use the sales and A/R period to calculate collections from April to May. Finally, calculate the A/R balance at the end of May. The firm collected $811.11 in the month of May.
Step-by-step explanation:
To calculate the amount the firm collected in the month of May, we need to determine the accounts receivable (A/R) balance at the end of May. Since the A/R period is 60 days, we can subtract 60 days from May 31st to find the starting date. This gives us April 1st. From April 1st to May 31st, there are 61 days. Therefore, the A/R balance at the end of May can be calculated as:
A/R balance at the end of May = $640 + sales from April to May - collections from April to May
Using the information given, the sales for April to May are $430 + $510 = $940. Since the A/R period is 60 days, the collections from April to May can be calculated as:
Collections from April to May = A/R balance at the start of April x sales from April to May / (360 / A/R period)
Inserting the values, we get:
Collections from April to May = $640 x $940 / (360 / 60)
Simplifying the equation, we find that:
Collections from April to May = $1,768.89
Finally, we can calculate the A/R balance at the end of May:
A/R balance at the end of May = $640 + $940 - $1,768.89 = $811.11
Therefore, the firm collected $811.11 in the month of May.