The Kafusi Company has the following budgeted sales: April May June July Credit

Question

The Kafusi Company has the following budgeted sales:

April May June July

Credit Sales....320,000 300,000 350,000 400,000

Cash Sales.....70,000 80,000 90,000 70,000

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. $180,000

B. $210,000

C. $242,000

I need to know how to solve this problem not just the answer.

Explanation / Answer

Hi,

Please find the detailed answer as follow:

April Credit Sales Due at the End of May = 320000*10% = 32000

+

May Credit Sales Due at the End of May = 300000*70% = 210000

Total Accounts Receivables = 32000 + 210000 = 242000

Answer is 242000.

Thanks.

Notes:

April Credit Sales still due will be taken as 10 % only because we have already collected 30% in April and 60% in May as specified in the question

May Credit Sales still due would be at 70% only because we have already collected 30% in May.

Thanks,

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