Question

Compton Company expects the following total sales: Month Sales March $20,000 $10,000 $34,000 $15,000 April May June The company expects 70 % of its sales to be credit sales and 30 % for cash. Credit sales are collected as follows: 25% in the month of sale, 75 % in the month following the sale. The budgeted accounts receivable balance on May 31 is: Multiple Choice $16,450. $17,850 $13,950. $25,500.

Answer 1

	SCHEDULE OF THE CASH RECEIPT FOR THE MONTH OF MAY, JUNE & JULY
	PARTICULARS	MAR	APRIL	MAY	JUNE
	Sales On Account	$            20,000	$               10,000	$               34,000	$                15,000
	Cash Sales 30%	$               6,000	$                 3,000	$               10,200	$                  4,500
	Balance 70% Is credit sales	$            14,000	$                 7,000	$               23,800	$                10,500
	25% Expected to collect in the same month	$               3,500	$                 1,750	$                 5,950	$                  2,625
	75% in the month following the sale		$               10,500	$                 5,250	$                17,850
	Total Cash Collected	$               3,500	$               12,250	$               11,200	$                20,475
	In month of May Credit sales =	$            23,800
	Cash collected against this sales =	$               5,950
	Cash collected against sales of April month	$               5,250
	AR balance of May = $ 23,800 - $ 5,950 =	$            17,850
	Answer = Option 2 = $ 17,850