A Company Sells a Particular Product Only in the Last

Multiple Choice

A company sells a particular product only in the last month of its fiscal year. The company uses commission agents for such sales and pays them 6% of their net sales 30 days after the sales are made. The agents' sales were $10 million. Experience indicates that 10% of the sales are usually not collected and 2% are returned in the first month of the new year. The auditor would expect the year-end balance in the accrued commissions payable account to be

A) $528,000.
B) $540,000.
C) $588,000.
D) $600,000.
#10,000,000 x 98% = $9,800,000 Net Sales x 6% commission percentage = $588,000 estimated accrued commissions payable.