Question

Due to increased demand in medical supplies, the Medihome Company is planning a new store opening on January 1. Medihome has talked to other similar retailers and based on that information they have decided to make the following projections for their sales:

	Cash Sales	Credit Sales
January	$71,600	$43,000
February	$33,000	$55,200
March	$43,600	$79,800
April	$40,200	$90,800

Medihome Co has other lines and knows from experience that 70% of their credit sales will be collected in the month after the month of sale, with the balance collected in the second month following the month of sale.

The March 31 balance in accounts receivable will be:

$79,800

$96,360

$121,360

$117,400

Answer 1

As 70% of the credit sales is recovered in the next month of sale month the remaining 30% of the credit sales will be collected in the following second month of the sale month. Therefore credit sales of February will be outstanding 30% as on March 31st because 70% will be collected in march month and 30% will be collected in April month.

Also credit sales of march month will be fully outstanding as accounts receivable because 70% of it will be collected in April month and 30% of it will be collected in May month.

March 31 balance in account receivable will be

February = 55,200*30% = 16,560

March = 79,800

Total= $96,360

Therefore the correct answer is $96,360

Correct option is 2nd

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