Ritter Stores, Inc., had credit sales in February of $500,000. Experience has sh

Question

Ritter Stores, Inc., had credit sales in February of $500,000. Experience has shown that merchandise equaling 10% of sales will be returned within 90 days. Returned merchandise is readily resalable. In addition, merchandise equaling 15% of sales will be exchanged for merchandise of equal or greater value. Assume that all of these amounts are material. What will be the increase in the net accounts receivable balance during February as a result of these sales?

a. 375,000

b. 382,500

c. 450,000

d. 500,000

Explanation / Answer

c. 450,000

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