A company has forecast sales in the first three months of the year as follows (figures in millions): January,$60; February,$80; March,$100.60% of sales are usually paid for in the month that they take place and 40% in the following month.Receivables at the end of December were $24 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 find out how much of the January, February, and March sales will be collected in March.

For January sales: 
60% of $60 million = $36 million will be collected in January 
40% of $60 million = $24 million will be collected in February

For February sales: 
60% of $80 million = $48 million will be collected in February 
40% of $80 million = $32 million will be collected in March

For March sales: 
60% of $100 million = $60 million will be collected in March 
40% of $100 million = $40 million will be collected in April

Now, let's add up the collections for each month:

In March, we will be collecting: 
$24 million from January sales 
$32 million from February sales 
$60 million from March sales

Total collections in March = $24 million + $32 million + $60 million = $116 million

However, we need to take into account the fact that receivables at the end of December were $24 million. This means that $24 million of the collections in January will be from sales made in December, and not from January sales.

So, the forecasted collections on accounts receivable in March would be: 
$116 million - $24 million = $92 million

Therefore, the best choice is B.

A Company Has Forecast Sales in the First Three Months