The following details have been obtained from the receivable’s records of DEF Company: Invoices paid in the month after the sale: 70% Invoices paid in the second month after sale: 15% Invoices paid in the third month after sale: 10% Bad debts: 5% Jan Feb Mar Apr May Credit Sales 45,000.00 65,000.00 72,000.00 85,000.00 120,000.00 Customers paying in the month after the sale are allowed a 10% discount. Invoices for sales are issued on the last day of the month in which the sales are made. The budgeted credit sales for the first five months of this year are: Required: What are the total budgeted receipts for May from credit sales?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The following details have been obtained from the receivable’s records of DEF Company:
- Invoices paid in the month after the sale: 70%
- Invoices paid in the second month after sale: 15%
- Invoices paid in the third month after sale: 10%
Bad debts: 5%
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Customers paying in the month after the sale are allowed a 10% discount. Invoices for sales are issued on the last day of the month in which the sales are made. The budgeted credit sales for the first five months of this year are:
Required: What are the total budgeted receipts for May from credit sales?
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