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Nish's Products Ltd is trying to forecast Accounts Receivable. On Jan 1, 2016 it has $250 in Accounts Receivable. On average, 20% of sales are
collected at the time of sale and 80% are collected the following month. Monthly Sales are provided below. I Sales Accounts Receivable (Month
Ending Balance) 2015 Dec $ 400 250 2016 Jan 67 350 Feb $ 200 Mar $ 150
Steps
Step 1 of 3
To forecast Accounts Receivable for Nish's Products Ltd, we need to understand the pattern of sales and collection of payments. Based on
the information provided, we can see that on average, 20% of sales are collected at the time of sale and 80% are collected the following
month.
January 2016:
Beginning Accounts Receivable (Jan 1, 2016): $250
Sales in January 2016: $67
20% of January sales is collected at the time of sale: 0.2 × $67 = $ 13.40
The remaining 80% is collected in February:0.8 × $67 = $ 53.60
Explanation
Ending Accounts Receivable (Jan 31, 2016) = Beginning Accounts Receivable + Sales - Amount collected at the time of sale `= $250 + $ 67 - $1
= $ 303.60`
Step 2 of 3
February 2016:
Beginning Accounts Receivable (Feb 1, 2016): $303.60
Sales in February 2016: $200
20% of February sales is collected at the time of sale: `0.2 × $200 = $40`
The remaining 80% is collected in March: `0.8 × $200 = $160`
Explanation
Ending Accounts Receivable (Feb 28, 2016) = Beginning Accounts Receivable + Sales - Amount collected at the time of sale `= $303.60 + $200
= $463.60`
Step 3 of 3
March 2016:
Beginning Accounts Receivable (Mar 1, 2016): $463.60
Sales in March 2016: $150
20% of March sales is collected at the time of sale: `0.2 × $150 = $30`
The remaining 80% is collected in April: `0.8 × $150 = $120`
Explanation
Ending Accounts Receivable (Mar 31, 2016) = Beginning Accounts Receivable + Sales - Amount collected at the time of sale `= $463.60 + $150
= $583.60`
Final Answer
