The budgeted accounts receivable balance on February 28 would be:

The Khaki Corporation has the following budgeted sales data:

The regular pattern of collection of credit sales is 40% in the month of sale, 50% in the month following sale, and the remainder in the second month following the month of sale. There are no bad debts.

$250,000
$210,000
$175,000
$215,000

Solutions

Expert Solution

The budgeted accounts receivables would comprise of the balance amount (10%) for January credit sales that remains outstanding at the end of February and 60% of the February credit sales. The formula for calculating the budgeted accounts receivable on February 28 can be derived as follows:

Budgeted Accounts Receivable (February 28) = January Credit Sales*10% + February Credit Sales*60%

___________

Solution:

Using the information provided in the question, we get

Budgeted Accounts Receivable (February 28) = 400,000*10% + 350,000*60% = $250,000 (which is Option A)

________

Notes:

1) Out of the credit sales of $400,000 in the month of January, 40% will be collected in January itself and 50% will get collected in February. The balance 10% will remain outstanding at the end of February.

2) Out of the credit sales of $350,000 in the month of February, 40% will be collected in February itself, and the balance of 60% will remain outstanding at the end of February.

ekkarill92 answered 2 years ago

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