A firm has forecasted sales of $3,000 in April, $4,500 in May and $6,500 in June. All sales are on credit. 30% is collected the month of sale and the remainder the following month. What will be the balance in accounts receivable at the beginning of July
1950
To calculate the balance in accounts receivable at the beginning of July, we need to consider the sales made in April, May, and June.
First, let's calculate the portion of sales collected in the month of sale and the portion collected in the following month for each month:
- April Sales: $3,000
Amount collected in April: 30% of $3,000 = $900
Remaining amount to be collected in May: $3,000 - $900 = $2,100
- May Sales: $4,500
Amount collected in May: 30% of $4,500 = $1,350
Remaining amount to be collected in June: $4,500 - $1,350 = $3,150
- June Sales: $6,500
Amount collected in June: 30% of $6,500 = $1,950
Now, let's calculate the balance in accounts receivable at the beginning of July:
Balance in accounts receivable = Remaining amount to be collected in May + Remaining amount to be collected in June
= $2,100 + $3,150
= $5,250
Therefore, the balance in accounts receivable at the beginning of July is $5,250.
To determine the balance in accounts receivable at the beginning of July, we need to calculate the amount that will be collected in July from the sales made in April, May, and June.
Step 1: Calculate the amount collected in the month of sale:
April Sales: $3,000 x 30% = $900 collected in April
May Sales: $4,500 x 30% = $1,350 collected in May
June Sales: $6,500 x 30% = $1,950 collected in June
Step 2: Calculate the amount collected in the following month:
April Sales: $3,000 - $900 = $2,100 collected in May
May Sales: $4,500 - $1,350 = $3,150 collected in June
June Sales: $6,500 - $1,950 = $4,550 collected in July
Step 3: Calculate the balance in accounts receivable at the beginning of July:
Balance in accounts receivable at the beginning of July = Amount collected in July from April Sales + Amount collected in July from May Sales + Amount collected in July from June Sales
= $2,100 + $3,150 + $4,550
= $9,800
Therefore, the balance in accounts receivable at the beginning of July will be $9,800.