Question

Parvis makes all sales on account, subject to the following collection pattern: 20% are collected in the month of sale; 70% 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 $70,000, $60,000, and $50,000, respectively, what was the budgeted receivables balance on December 31

Answer 1

Answer:

Balance as on 31st December = $46,000

Explanation:

                      Sales      October   November  December  Balance

October      $70,000    $14,000    $49,000       $7,000      $0

November  $60,000                      $12,000        $42,000   $6,000

December  $50,000                                            $10,000    $40,000

Balance as on 31st December                                              $46,000

Workings

October: 20% of 70,000 = 14,000, 70% of 70,000 = $49,000, 10% of 70,000 = $7,000

November = 20% of 60,000 = 12,000, 70% of 60,000 = $42,000, Balance = 60,000 - (12,000+42,000) = $6,000

December = 20% of 50,000 = $10,000, Balance = 50,000 - 10,000 = $40,000