$\begin{array}{lcc}
&\text { Cash Sales} &\text { Credit Sales}\
\text { January } & £ 80,000 & £ 350,000 \
\text { February } & 60,000 & 200,000 \
\text { March } & 50,000 & 145,000 \
\text {April}& 45,000 & 130,000 \
\text { May}& 55,000 & 170,000 \
\text { June}& 50,000 & 150,000 \
\end{array}$The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:Collections on credit sales:
$60 \%$ in month of sale
$30 \%$ in month following sale
$10 \%$ in second month following sale
- What is the budgeted accounts receivable balance on May 30

A)£81,000.
B)£68,000.
C)£60,000.
D)£141,000.

Question

$\begin{array}{lcc}
&\text { Cash Sales}  &\text { Credit Sales}\
 \text { January } & £ 80,000 & £ 350,000 \
 \text { February } & 60,000 & 200,000 \
 \text { March  } & 50,000 & 145,000 \
 \text {April}& 45,000 & 130,000 \
 \text { May}& 55,000 & 170,000 \
 \text { June}& 50,000 & 150,000 \
\end{array}$The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:Collections on credit sales:
$60 \%$ in month of sale
$30 \%$ in month following sale
$10 \%$ in second month following sale
- What is the budgeted accounts receivable balance on May 30

A)£81,000.
B)£68,000.
C)£60,000.
D)£141,000.

Quizplus · Accepted Answer

The budgeted accounts receivable balance on May 30 is £81,000. This is calculated as follows:Collections on credit sales in May: £170,000 x 60% = £102,000Collections on credit sales in April: £130,000 x 30% = £39,000Collections on credit sales in March: £145,000 x 10% = £14,500Total collections in May: £102,000 + £39,000 + £14,500 = £155,500Budgeted accounts receivable balance on May 30: £350,000 (opening balance) + £155,500 (collections) - £170,000 (credit sales) = £81,000

The Company Is in the Process of Preparing a Cash