Question

Vern's makes all sales on account, subject to the following collection pattern: 20% are collected in the month of sale; 70% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for October, November, and December were $70,000, $60,000, and $50,000, respectively, what was the budgeted receivables balance on December 31?

A. $40,000.
B. $46,000.
C. $49,000.
D. $59,000.
E. Some other amount

Answer 1

B. $46,000.

Step-by-step explanation:

The computation of the budgeted receivables balance on December 31 is shown below:

Particulars Sale October NOvember December Balance

October $70,000 $14,000 $49,000 $7,000 $0

($70,000 × 20%) ($70,000 × 70%) ($70,000 × 10%)

NOvemeber $60,000 $12,000 $42,000 $6,000

($60,000 × 20%) ($60,000 × 70%)

December $50,000 $10,000 $40,000

($50,000 × 20%)

Total it would be

= $6,000 + $40,000

= $46,000