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Hello Sir,
I have some confusion about the budgetary process.
The following details have been extracted from the receivables records of X:
Invoices paid in the month after sale 60%
Invoices paid in the second month after sale 25%
Invoices paid in the third month after sale 12%
Bad debts 3%
Credit sales for June to September are budgeted as follows:
June $35,000
July $40,000
August $60,000
September $45,000
Customers paying in the month after sale are entitled to deduct a 2% settlement discount.
Invoices are issued on the last day of the month.
The amount budgeted to be received in September from credit sales is:
A. $46,260
B. $49,480
C. $50,200
D. $50,530I don’t understand why in the solution they are assigning Invoice paid in the month after sale 60% to August. I thought that the correct way would be giving 12% for the August sales because June July August is the third month.
Solution:
August Sales 60000*60%*0.98=35280
July sales 40000*25%=10 000
June sales 35000*12=4200Answer 49480
Thank you in advance!
The answer is correct.
Sales in August are $60,000. The month after August is September, and so 60% of August’s sales will be received in September (less discount of 2%).
In addition in September they will receive 25% of July’s sales (because September is 2 months after July), and they will receive 12% of June’s sales (because September is 2 months after June).
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