The Dawson Brothers have a 60 day collection period. Sales for the next calendar year are estimated at $1,800, $1,300, $2,200 and $2,000, respectively, by quarter starting with the first quarter of the year. Given this information, which one of the following statements is correct? Assume a year has 360 days.

Question

Quizplus · Accepted Answer

The accounts receivable balance at the beginning of Quarter 4 can be calculated by considering the sales that occurred 60 days prior. Since a year has 360 days and each quarter has 90 days, the sales from the last 60 days of Quarter 3 will be collected in Quarter 4. The sales in Quarter 3 are $2,200, and since the collection period is 60 days, two-thirds of Quarter 3's sales will be collected in Quarter 4, which is $2,200 * (60/90) = $1,466.67.

The Dawson Brothers Have a 60 Day Collection Period