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 × 98% = $9,800,000 Net Sales × 6% commission percentage = $588,000 estimated accrued commissions payable.