(Collection fractions and receivables balance fractions) The Deep River Company collects 20% of its sales in the month of the sale, 50% in the month following the sale, 25% in the second month following sale, and 5% in the third month following sale.
a. For a given month’s sales, what percentage of that month’s sales should be outstanding at the end of the sale month, in the first month after the sale, the second month after the sale, and the third month after the sale?
b. Assume that collections proceed as predicted. Calculate the level of accounts receivable for January, February, and March from the sales information given.
Sales are: 700 800 600 500 700 900