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

Answer:

B. $46,000.

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