The company usually collects credit sales 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts. The budgeted accounts receivable balance on September 30 is: a. $126,000 b. $148,000 c. $166,000 d. $190,000

c. $166,000

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Where the sale is made on cash basis, the debit goes to the cash account.

Based on assessment, some or all of the receivables may be uncollectible.  To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

The accounts receivable on September 30 would include 10% credit sales in August and 80% of credit sale in September

Given that

                              July August September October

Cash sales$80,000$70,000$50,000$60,000

Credit sales240,000220,000180,000200,000

The budgeted accounts receivable balance on September 30

= 10% *$220,000 + 80% * $180,000

= $22,000 + $144,000

= $166,000

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