Carlton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales.

All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale.

What is the budgeted Accounts Receivable balance on May 31?

a) $161.250

b) $267,000

c) $241,500

d) $296,000

expected cash collections = $296000

so correct option is d) $296,000

Explanation:

given data

forecast sales February = $205,000

March = $270,000

April = $290,000

May = $310,000

average cost of goods sold = 60%

to find out

budgeted Accounts Receivable balance on May 31

solution

we get here first Remainder collections that is

Remainder collections = 100% - 50% - 30%

Remainder collections = 20%

so expected cash collections in May is here

expected cash collections = (0.5 * May) + (0.3*April) + (0.2 * March)

expected cash collections = (0.5 * 310000) + (0.3*290000) + (0.2 * 270000)

expected cash collections = $296000

so correct option is d) $296,000