Asked by Alyssa Palmer on Jul 28, 2024
Verified
Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105. Budgeted unit sales for July, August, September, and October are 7,400, 7,500, 13,800, and 15,300 units, respectively. All sales are on credit. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month.The budgeted accounts receivable balance at the end of August is closest to:
A) $525,000
B) $315,000
C) $472,500
D) $787,500
Budgeted Selling Price
The anticipated price at which a product is expected to be sold, as estimated during the budgeting process.
Budgeted Unit Sales
The projected quantity of units that a company plans to sell in a specified budget period, often used for financial planning and forecasting.
Accounts Receivable
Represents money owed to a company by its customers for goods or services that have been delivered but not yet paid for.
- Achieve proficiency in understanding cash collections and accounts receivable in relation to budgeting.
- Assess allocated sales data to pinpoint expected cash receipts, budgeted receivables, and estimated sales values.
Verified Answer
July sales = 7,400 × $105 = $777,000
August sales = 7,500 × $105 = $787,500
September sales = 13,800 × $105 = $1,449,000
October sales = 15,300 × $105 = $1,606,500
Step 2: Calculate the collections for each month
July collections = 40% × $777,000 = $310,800
August collections = 40% × $787,500 + 60% × $777,000 = $314,400 + $466,200 = $780,600
September collections = 40% × $1,449,000 + 60% × $787,500 = $579,600 + $472,500 = $1,052,100
October collections = 40% × $1,606,500 + 60% × $1,449,000 = $642,600 + $869,400 = $1,512,000
Step 3: Calculate the accounts receivable balance at the end of August
Accounts receivable balance at the end of July = $777,000 × 60% = $466,200
Accounts receivable balance at the end of August = ($787,500 - $310,800) × 60% + $466,200 = $155,700 + $466,200 = $621,900
Therefore, the closest option to the budgeted accounts receivable balance at the end of August is C) $472,500.
Learning Objectives
- Achieve proficiency in understanding cash collections and accounts receivable in relation to budgeting.
- Assess allocated sales data to pinpoint expected cash receipts, budgeted receivables, and estimated sales values.
Related questions
Sirignano Corporation Produces and Sells One Product ...
Seventy Percent of Pitkin Corporation's Sales Are Collected in the ...
The LaPann Corporation Has Obtained the Following Sales Forecast Data ...
Um Corporation Has Provided the Following Information Concerning Its Raw ...
Mumbower Corporation Makes One Product and Has Provided the Following ...