Exercise 21-17 LRF Company’s budgeted sales and direct materials purchases are a

Question

Exercise 21-17

LRF Company’s budgeted sales and direct materials purchases are as follows.

Budgeted Sales
Budgeted D.M. Purchases
January $258,000 $38,700
February 283,800 45,150
March 348,300 52,890

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.

1. Prepare a schedule of expected collections from customers for March. (Round answers to 0 decimal places, e.g. 2,500.)

2. Prepare a schedule of expected payments for direct materials for March. (Round answers to 0 decimal places, e.g. 2,500.)

Explanation / Answer

EXPECTED COLLECTION

MARCH COLLECTIONS=>

MARCH = 348300 * 30% + 348300 *70% *10%

+ FEB = 283800* 70% *50%

+ JAN= 258000 * 70% *36%

=> 104490+24381+99330+65016

COLLECTIONS OF MARCH => $293217

EXPECTED PAYMENTS

MARCH PAYMENTS=>

MARCH = 52890 *50% + 52890 *50% *40%

+ FEB= 45150 *50% * 60%

=> 26445+10578+13545

=> 50568

PAYMENTS OF MARCH => $50568

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