Gardner Company expects sales for October of $248,000.Experience suggests that 45% of sales are for cash and 55% are on credit.The company collects 50% of its credit sales in the month of sale and 50% in the month following sale.Budgeted Accounts Receivable on September 30 is $67,000.What is the amount of Accounts Receivable on the October 31 budgeted balance sheet?

A) $111,600.
B) $124,000.
C) $67,000.
D) $68,200.
E) $136,400.

Question

Brady Sellers · Accepted Answer

Final Answer : D, Explanation :  First, we calculate the amount of credit sales for October:$248,000 x 55% = $136,400Then, we calculate how much of those credit sales will be collected in October:$136,400 x 50% = $68,200The remaining $68,200 will be collected in November.To calculate the ending Accounts Receivable balance, we add the amount of credit sales that will be collected in November to the amount of credit sales that will still be outstanding on October 31:$68,200 (collected in Nov) + [$136,400 x 50% (not yet collected)] = $102,200Finally, we add the beginning Accounts Receivable balance to the credit sales that will still be outstanding on October 31 to get the total Accounts Receivable balance on the October 31 budgeted balance sheet:$67,000 (beginning balance) + [$136,400 x 50% (not yet collected)] = $102,200Therefore, the answer is D) $68,200.

Definitions

Learning Objectives

Learning Objectives

Related questions