A company has forecast sales in the first 3 months of the year as follows (figures in millions): January, $200; February, $140; March, $100. 50% of sales are usually paid for in the month that they take place, 30% in the following month, and the final 20% in the next month. Receivables at the end of December were $100 million. What are the forecasted collections on accounts receivable in March?

Question

Quizplus · Accepted Answer

To calculate the forecasted collections on accounts receivable in March, we need to first calculate what percentage of the total sales of January, February, and March will be collected in March.

For January sales: 50% will be collected in January, 30% in February, and 20% in March. Therefore, 20% of $200 million will be collected in March, which is $40 million.

For February sales: 50% will be collected in February, 30% in March, and 20% in April. Therefore, 30% of $140 million will be collected in March, which is $42 million.

For March sales: 50% will be collected in March, 30% in April, and 20% in May. Therefore, 50% of $100 million will be collected in March, which is $50 million.

Total forecasted collections in March = $40 million + $42 million + $50 million = $132 million.

Therefore, the answer is choice A) $132 million.

A Company Has Forecast Sales in the First 3 Months