Reference no: EM132612799

Question - Durnev Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below:

Durnev Corporation Balance Sheet June 30

Assets Cash $96,000

Accounts receivable 139,000

Inventory 70,200

Plant and equipment, net of depreciation 228,000

Total assets $533,200

Liabilities and Stockholders' Equity Accounts payable $89,000

Common stock 333,000

Retained earnings 111,200

Total liabilities and stockholders' equity $533,200

The company managers have made the following additional assumptions and estimates:

1. Estimated sales for July, August, September, and October will be $390,000, $410,000, $400,000, and $420,000, respectively.

2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July.

3. Each month's ending inventory must equal 30% of the cost of next month's sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.

4. Monthly selling and administrative expenses are always $54,000. Each month $7,000 of this total amount is depreciation expense and the remaining $47,000 relates to expenses that are paid in the month they are incurred.

5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.

Required - How much is the company's expected Accounts Receivable balance on September 30?

a. $260,000

b. $266,500

c. $406,500

d. $140,000