Question

Harrti Corporation has budgeted for the following sales: 

July August September October November December 

$455,000 $557,000 $663,000 $823,000 $773,000 $733,000

 Sales are collected as follows: 10% in the month of sale; 60% in the month following the sale, and the remaining 30% in the second month following the sale. In Razz's budgeted balance sheet at December 31, at what amount will accounts receivable be shown?

• $733,000 

• $659,700 

• $891,600 

• $231,900

Answer 1

• On 31 Dec, the Account receivable balance will consist of:
  >30% of November sale [as 10% was received in Nov, and 60% in Dec] = $ 773000 x 30% = $ 231,900
  >90% of December sale [as 10% was collected in Dec] = $ 733000 x 90% = $ 659,700
• Total accounts receivables on Dec 31
  = $ 231900 + 659700
  = $ 891,600
• Correct Answer = Option #3: $ 891,600