Question

In: Accounting

1. Plantsville makes all sales on account, subject to the following collection pattern: 30% are collected...

1. Plantsville makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for October, November, and December were $79,000, $69,000, and $59,000, respectively, what was the budgeted receivables balance on December 31? Multiple Choice $67,000. $41,300. $48,200. $49,300. None of the answers is correct.

2.  

Glastonbury Inc. began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 25% are collected in the month of sale; 55% are collected in the first month after sale; and 20% are collected in the second month after sale. If sales for April, May, and June were $64,000, $84,000, and $74,000, respectively, what were the firm's budgeted collections for April?

Multiple Choice

  • $16,000.

  • $18,500.

  • $56,200.

  • $48,000.

  • None of the answers is correct.

Solutions

Expert Solution

Answer: 1)
Budgeted receivables balance on December 31
                       =   November sale + December sale
                       = (10% of $69,000) + (60% + 10%) x $59,000
                       = (10% x $69,000) + (70% x $59,000)
                       = $6,900 + $41,300
                       = $48,200
Budgeted receivables balance on December 31 = $48,200
From given options, option ( c ) is correct i.e., $48,200
Answer: 2)
Budgeted collections for April    =   $64,000 x 25%
                                                                 =   $16,000
Budgeted collections for April = $16,000
From given options, option ( a ) is correct i.e., $16,000

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