A company has forecast sales in the first three months of the year as follows (figures in millions): January, $60; February, $80; March, $100.Sixty percent of sales are usually paid for in the month that they take place and 40 percent 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 first calculate the sales for each month that will result in accounts receivable.

For January, 60% of $60 million is $36 million, which will result in accounts receivable.

For February, 60% of $80 million is $48 million, which will result in accounts receivable.

For March, 60% of $100 million is $60 million, which will result in accounts receivable.

Now, we need to calculate the collections on each of these accounts receivable for March.

40% of January's accounts receivable ($36 million) will be collected in March, which is $14.4 million.

100% of February's accounts receivable ($48 million) will be collected in March, which is $48 million.

Finally, 100% of March's accounts receivable ($60 million) will be collected in March, which is $60 million.

Therefore, the total forecasted collections on accounts receivable in March is $14.4 million + $48 million + $60 million = $92 million.

So, the correct answer is B.

A Company Has Forecast Sales in the First Three Months