Memphis Company anticipates total sales for April, May, and June of $970,000, $1,070,000, and $1,120,000 respectively. Cash sales are normally 20% of total sales. Of the credit sales, 40% are collected in the same month as the sale, 55% are collected during the first month after the sale, and the remaining 5% are collected in the second month. Compute the amount of accounts receivable reported on the company’s budgeted balance sheet for June 30.

The amount of accounts receivable reported on the company’s budgeted balance sheet for June 30 will be $580,400.

Explanation:

The Trade Receivable Budget can be used to calculate the amount of of accounts receivable balance on June 30 as follows

                                                   April              May             June

Balance Brought forward           $0           $465,600    $552,400

Credit Sales  at 80%             $776,000     $856,000    $896,000

Cash Received - 40%           ($310,400)   ($342,400)   ($358,400)

Cash Received - 55%                   $0        ($426,800)   ($470,800)

Cash Received - 5%                     $0                 $0          ($38,800)

Balance Carried forward      $465,600     $552,400    $580,400

Conclusion :

The amount of accounts receivable reported on the company’s budgeted balance sheet for June 30 will be $580,400.