Question

abc, incorporated, has a beginning receivables balance on january 1st of $660. sales for january through april are $420, $450, $530 and $550, respectively. the accounts receivable period is 60 days. how much did the firm collect in the month of march? assume that a year has 360 days.

Answer 1

ABC, Incorporated collected $1080 in March by combining their January sales of $420 with a beginning receivables balance of $660. The firm's accounting profit is calculated by subtracting total expenses of $950,000 (labor, capital, materials) from sales revenue of $1,000,000, resulting in $50,000.

Step-by-step explanation:

To calculate how much ABC, Incorporated collected in the month of March, we must first understand the accounts receivable period of 60 days. This means collections in March will be for the sales made 60 days prior, which are the sales from January. ABC, Incorporated began with a receivables balance of $660 on January 1st, and had sales of $420 in January. Assuming all January sales are collected in March due to the 60-day period, the firm collected $420 in sales plus the beginning receivables balance of $660 in March. Therefore, the total collections for March are the sum of the receivables and January sales, which is $1080.

Now, looking at the self-check questions, to calculate the firm's accounting profit, we subtract the explicit costs from the total revenues as follows:

1. Total sales revenue: $1,000,000
2. Total expenses (labor + capital + materials): $600,000 + $150,000 + $200,000 = $950,000

Accounting Profit = Total Revenues - Explicit Costs = $1,000,000 - $950,000 = $50,000.