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18 July, 07:13

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

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Answers (1)
  1. 18 July, 09:26
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    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
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