Kingston anticipates total sales for June and July of $420,000 and $398,000, respectively. Cash sales are normally 60% of total sales. Of the credit sales, 20% are collected in the same month as the sale, 70% are collected during the first month after the sale, and the remaining 10% are collected in the second month after the sale. Determine the amount of accounts receivable reported on the company's budgeted balance sheet as of July 31.

Question

Business

Madonna

18 October, 12:55

Kingston anticipates total sales for June and July of $420,000 and $398,000, respectively. Cash sales are normally 60% of total sales. Of the credit sales, 20% are collected in the same month as the sale, 70% are collected during the first month after the sale, and the remaining 10% are collected in the second month after the sale. Determine the amount of accounts receivable reported on the company's budgeted balance sheet as of July 31.

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Lyla Maddox · Answer 1

Accounts Receivable reported on the company's budgeted balance sheet as of July 31 = $144,160

Explanation:

Credit sales = 40% of Total sales for the month.

Provided the accounts receivable shall be collected as follows:

20% in the same month

70% in next month

10% in the second next month

Now balance outstanding at the end of July of accounts receivable shall be:

Credit Sales for June = $420,000 X 40% = $168,000

Out of which 20% is collected in June itself.

70% in July and only 10% is outstanding = $168,000 X 10% = $16,800

From the sale of July we have

20% paid in the month itself

Remaining 80% is outstanding

Credit sales = $398,000 X 40% = $159,200

Outstanding at month end = $159,200 X 80% = $127,360

Net outstanding at 31 July = $16,800 + $127,360 = $144,160