Question

If the actual A/R at the end of February was $12,000 and projected sales in March are $50,000, where 70% of sales are on credit, 60% of credit sales are collected in the month of the sale, and 40% are collected in the month after the sale, what is the projected A/R balance on the pro forma balance sheet for the end of March?

Answer 1

Answer:

The projected A/R balance on the pro forma balance sheet for the end of March is $26,000

Explanation:

The computation of the projected A/R balance for the march month is shown below:

= February A/R + march A/R

where,

February A/R = $12,000

And, the March A/R = March Projected sales × credit sales percentage × next month collection percentage

= $50,000 × 70% × 40%

= $14,000

Now put these values to the above computation

So, the value would be equal to

= $12,000 + $14,000

= $26,000