The LaPann Company has obtained the following sales forecast data:
July August September October
Cash sales $80,000 $70,000 $50,000 $60,000
Credit sales 240,000 220,000 180,000 200,000
The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the following the month of sale and the remainder in the second month following the month of sale. There are no bad debts.
Required:
1. The budgeted accounts receivable balance on September 30 is:
A) $126,000
B) $148,000
C) $166,000
D) $190,000
2. The budgeted cash receipts for October are:
A) $188,000
B) $248,000
C) $226,000
D) $278,000
3. Pitkins Company collects 20% of a month's sales in the month of sale, 70% in the month following sale and 6% in the second month following sale. The remainder is uncollectible. Budgeted sales for the next four months are:
January February March April
Budgeted sales $200,000 $300,000 $350,000 $250,000
Cash collections in April are budgeted to be:___
A) $321,000
B) $313,000
C) $320,000
D) $292,000

Given that for credit sales, the regular pattern of collection is 20% in the month of sale, 70% in the following the month of sale and the remainder in the second month following the month of sale.

Account receivable balance is made up of credit sales yet to collected.

The budgeted accounts receivable balance on September 30

= 10% * $220,000 + 80% * $180,000

= $22,000 + $144,000

= $166,000

The budgeted cash receipts for October

= $60,000 + 20% * $200,000 + 70% * $180,000 + 10% * $220,000

= $60,000 + $40,000 + $126,000 + $22,000

= $248,000