A company has forecast sales in the first 3 months of the year as follows (figures in millions): January, $80; February, $60; March, $40. 70% of sales are usually paid for in the month that they take place, 20% in the following month, and the final 10% in the next month. Receivables at the end of December were $23 million. What are the forecasted collections on accounts receivable in March?

Question

Quizplus · Accepted Answer

To solve the problem, we need to calculate the sales that will be collected in March.

For January sales: 
- 70% will be collected in January: $80 million x 70% = $56 million 
- 20% will be collected in February: $80 million x 20% = $16 million 
- 10% will be collected in March: $80 million x 10% = $8 million

For February sales: 
- 70% will be collected in February: $60 million x 70% = $42 million 
- 20% will be collected in March: $60 million x 20% = $12 million 
- 10% will be collected in April: $60 million x 10% = $6 million

For March sales: 
- 70% will be collected in March: $40 million x 70% = $28 million 
- 20% will be collected in April: $40 million x 20% = $8 million 
- 10% will be collected in May: $40 million x 10% = $4 million

Total collections in March: $8 million (from January sales) + $12 million (from February sales) + $28 million (from March sales) = $48 million

Therefore the answer is D) $48 million.

A Company Has Forecast Sales in the First 3 Months