Michael Ltd. has the following sales forecasts for the first three months of 2011: $$\begin{array} { l c }
\text { Month } & \text { Sales } \
\text { January } & £ 36,000 \
\text { February } & 24,000 \
\text { March } & 40,000
\end{array}$$ Sixty-five per cent of sales are collected in the month of the sale and the remainder are collected in the following month. $\begin{array}{lr}
\text { Accounts receivable balance (January 1,2011) } & £ 16,000 \
\text { Cash bal ance (January } 1,2011) & 12,000
\end{array}$ Minimum cash balance is £20,000. Cash can be borrowed in £1,000 increments from the local bank (assume no interest charges). How much cash would be collected in March from sales?
A)£32,000
B)£58,400
C)£48,000
D)£34,400

Question

Michael Ltd. has the following sales forecasts for the first three months of 2011: $$\begin{array} { l c } 
\text { Month } & \text { Sales } \
\text { January } & £ 36,000 \
\text { February } & 24,000 \
\text { March } & 40,000
\end{array}$$ Sixty-five per cent of sales are collected in the month of the sale and the remainder are collected in the following month. $\begin{array}{lr}
\text { Accounts receivable balance (January 1,2011) } & £ 16,000 \
\text { Cash bal ance (January } 1,2011) & 12,000
\end{array}$ Minimum cash balance is £20,000. Cash can be borrowed in £1,000 increments from the local bank (assume no interest charges). How much cash would be collected in March from sales?
A)£32,000
B)£58,400
C)£48,000
D)£34,400

Quizplus · Accepted Answer

In March, 65% of March sales (£40,000) are collected, which is £26,000. Additionally, the remaining 35% of February sales (£24,000) are collected, which is £8,400. Adding these amounts gives £26,000 + £8,400 = £34,400.

Michael Ltd Sixty-Five Per Cent of Sales Are Collected in the Month