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

Wilson Frederick

Business

1 August, 07:21

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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Annabelle Flores · 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