Question

Kingston anticipates total sales for June and July of \(420,000 and \)398,000, respectively. Cash sales are normally 60% of total sales. Of the credit sales, 20% are collected in the same month as the sale, 70% are collected during the first month after the sale, and the remaining 10% are collected in the second month after the sale. Determine the amount of accounts receivable reported on the company’s budgeted balance sheet as of July 31.

Short answer

The total accounts receivables as of July 31 are $180,200.

Step-by-step solution

Step 1:Determination of the amount of accounts receivables

$$\begin{gathered} \mathbf{Total}\mathbf{}\mathbf{accounts}\mathbf{}\mathbf{receivables}\mathbf{}\mathbf{as}\mathbf{}\mathbf{og}\mathbf{}\mathbf{July}\mathbf{}\mathbf{31}\mathbf{=}\mathbf{Accounts}\mathbf{}\mathbf{receivables}\mathbf{}\mathbf{as}\mathbf{}\mathbf{of}\mathbf{}\mathbf{July}\mathbf{31}\mathbf{}\mathbf{forJune}\mathbf{}\mathbf{sales}\mathbf{+} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{Accounts}\mathbf{}\mathbf{receivables}\mathbf{}\mathbf{as}\mathbf{}\mathbf{of}\mathbf{}\mathbf{July}\mathbf{31}\mathbf{}\mathbf{for}\mathbf{}\mathbf{July}\mathbf{}\mathbf{sales} \\ \mathbf{=}\mathbf{\$}\mathbf{21}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{159}\mathbf{,}\mathbf{200} \\ \mathbf{=}\mathbf{\$}\mathbf{180}\mathbf{,}\mathbf{200} \end{gathered}$$

Step 2:Working notes

$$\begin{gathered} \mathbf{AccountsreceivablesasofJuly}\mathbf{31}\mathbf{forJunesales}\mathbf{=}\mathbf{Junecreditsales}\mathbf{\times }\mathbf{Collectionrate} \\ \mathbf{=}\mathbf{\$}\mathbf{420}\mathbf{,}\mathbf{000}\mathbf{\times }\left(\mathbf{70}\mathbf{\%}\mathbf{-}\mathbf{20}\mathbf{\%}\right)\mathbf{\times }\mathbf{10}\mathbf{\%} \\ \mathbf{=}\mathbf{\$}\mathbf{420}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{50}\mathbf{\%}\mathbf{\times }\mathbf{10}\mathbf{\%} \\ \mathbf{=}\mathbf{\$}\mathbf{21}\mathbf{,}\mathbf{000} \\ \mathbf{AccountsreceivablesasofJuly}\mathbf{31}\mathbf{forJulysales}\mathbf{=}\mathbf{Julycreditsales}\mathbf{\times }\mathbf{Collectionrate} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{398}\mathbf{,}\mathbf{000}\mathbf{\times }\left(70\%-20\%\right)\mathbf{\times }\left(100\%-20\%\right) \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{398}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{50}\mathbf{\%}\mathbf{\times }\mathbf{80}\mathbf{\%} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{159}\mathbf{,}\mathbf{200} \end{gathered}$$