LRF Company\'s budgeted sales and direct materials purchases are as follows. LRF
ID: 2468121 • Letter: L
Question
LRF Company's budgeted sales and direct materials purchases are as follows. LRF's sales are 30% cash and 70% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. LRF's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase. Prepare a schedule of expected collections from customers for March. (Round answers to 0 decimal places, e.g. 2,500.) Prepare a schedule of expected payments for direct materials for March. (Round answers to 0 decimal places, e.g. 2,500.)Explanation / Answer
a) Jan Sales = $252000
Credit sales=70% *252000=176400
Collections in Jan = $176400 × 10% = $17640; Collections in Feb = $176400 × 50% = $88200 ,Collections in March=$176400 × 36%=63504,Uncollectible sales=4% of 176400=7056
b) Feb Sales = $277,200
Credit sales=70% *277200=194040
Collections in Feb = $194040 × 10% = $19404; Collections in March = $194040 × 50% = 97020, Collections in April=$194040 × 36%=69854.4, Uncollectible sales=4% of 194040=7761.6
c) March Sales = $340200
Credit sales=70% * 340200=238140
Collections in March= $238140 × 10% = $23814; Collections in April = $238140 × 50% = 119070 , Collections in May=$238140 × 36%=85730.4, Uncollectible sales=4% of 238140=9525.6
LRF company
Expected collection from customers
March
36% of Jan credit sales i.e. 176400
63504
50% of Feb credit sales i.e. 194040
97020
10% of March credit sales i.e. 238140
23814
Total
184338
a) Jan Purchases = $37800
Payments in Jan = $37800 × 40% = $15120; Payments in Feb = $37800 × 60% = $22680 ,
b) Feb purchases = $44100
Payments in Feb = $44100 × 40% = $17640; Payments in March = $44100 × 60% = $26460
c) March purchases = $51660
Payments in March = $51660 × 40% = $20664; Payments in April = $51660 × 60% = $30996
d) Jan Sales = $252000
Credit sales=70% *252000=176400
Collections in Jan = $176400 × 10% = $17640; Collections in Feb = $176400 × 50% = $88200 ,Collections in March=$176400 × 36%=63504,Uncollectible sales=4% of 176400=7056
e) Feb Sales = $277,200
Credit sales=70% *277200=194040
Collections in Feb = $194040 × 10% = $19404; Collections in March = $194040 × 50% = 97020, Collections in April=$194040 × 36%=69854.4, Uncollectible sales=4% of 194040=7761.6
f) March Sales = $340200
Credit sales=70% * 340200=238140
Collections in March= $238140 × 10% = $23814; Collections in April = $238140 × 50% = 119070 , Collections in May=$238140 × 36%=85730.4, Uncollectible sales=4% of 238140=9525.6
LRF company
Expected collection from customers
March
36% of Jan credit sales i.e. 176400
63504
50% of Feb credit sales i.e. 194040
97020
10% of March credit sales i.e. 238140
23814
Total
184338
d) Jan Purchases = $37800
Payments in Jan = $37800 × 40% = $15120; Payments in Feb = $37800 × 60% = $22680 ,
e) Feb purchases = $44100
Payments in Feb = $44100 × 40% = $17640; Payments in March = $44100 × 60% = $26460
f) March purchases = $51660
Payments in March = $51660 × 40% = $20664; Payments in April = $51660 × 60% = $30996
LRF company
Expected payment for direct materials
March
60% of Feb Purchases i.e 441000
26460
40% of March purchases i.e 51660
20664
Total
47124
LRF company
Expected collection from customers
March
36% of Jan credit sales i.e. 176400
63504
50% of Feb credit sales i.e. 194040
97020
10% of March credit sales i.e. 238140
23814
Total
184338
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