Question

Ross Corporation makes all sales on account. The June 30th balance sheet balance in its accounts receivable is $400,000, of which $240,000 pertain to sales that were made during June. Budgeted sales for July are $1,250,000. Ross collects 70% of sales in the month of sale; 20% in the following month; and the final 10% in the second month after the sale. What are Ross's budgeted collections for July?

Answer 1

Answer:

Ross's budgeted collections for July is $1,195,000

Explanation:

The computation of the budgeted collections for July month is shown below:

July sales = Budgeted sales × collection percentage

                = $1,250,000 × 70%

                = $875,000

June sales = (Budgeted sales ÷ remaining collection percentage) × collection percentage

= ($240,000 ÷ 30%) × 20%

= $160,000

May sales = Accounts receivable balance - June sales

                = $400,000 - $240,000

               = $160,000

Now sum up all three months sales

So, the value would be

= $875,000 + $160,000 + $160,00

= $1,195,000