Question

Madden Inc. has the following sales budget for the first two quarters of next year: January $250,000 April $220,000 February $200,000 May $245,000 March $230,000 June $198,000 Cash collections have been determined to follow the pattern below: 60 percent of sales collected in month of sales 25 percent of sales collected in month after sale 12 percent of sales collected two months after sale 3 percent of sales is uncollectible Reference: Ref. 15-6 What is the ending balance of accounts receivable for March, assuming uncollectibles are "written off" at the end of the second month (Uncollectibles from August would be "written off" at the end of October, before the financial statements are prepared.) A.$129,500 B.$ 30,000 C.$122,000 D.$ 92,000

Answer 1

Option C is correct.

$ 122,000

Step-by-step explanation:

January sales :97 % of sales of January are collected in Jan, Feb and March

3 % of sales of January are written off in March. Therefore none of January month sales forms part of March month account receivable

Account receivable of March = 15 % of February Sales + 40% of March month sales

= 15 % ($ 200,000) + 40 % ( $ 230,000)

= $ 30,000 + $ 92,000

= $ 122,000