Question

27) Corbin Company has prepared the following sales budget:

Month                     Cash Sales                    Credit Sales

September                    $99,000                         $250,000

October                        225,000                           180,000

November                    310,000                           210,000

December                      94,000                           170,000

Collections of credit sales are 50% in the month of sale, 40% in the month following sale, and 10% two months following sale. No uncollectible accounts are expected. What is the expected balance in Accounts Receivable at November 30?

A) $77,500

B) $105,000

C) $123,000 this is the correct answer. Please explain every step of how to get accts receivable

D) $210,000

Answer 1

Answer:

Option (C) is correct.

Reason:

Statement showing the Cash collections made in respect of Credit Sales

Sales Month

Cash Collections in respect of Credit Sales

	September	October	November	December	January	February	Total
September	125000	100000	25000	0	0	0	250000
October	0	90000	72000	18000*	0	0	180000
November	0	0	105000	84000*	21000*	0	210000
December	0	0	0	85000	68000	17000	170000
Total Collections	125000	190000	202000	187000	89000	17000	810000

Note:

* Indicates amount yet to be received in respect of credit sales made till November, 30

Calculation of Accounts Receivable on November 30.

Particulars	Amount
Credit Sales made during September to November	640000
Less: Collection made in respect of these sales	(517000)
Balance of Accounts Receivable on November, 30	123000

Accordingly option C is correct.