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

ID: 2469194 • 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, 40% in the month following sale, and 46% 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. Prepare a schedule of expected payments for direct materials for March.

Explanation / Answer

Prepare a schedule of expected collections from customers for March:

LRF Company

Expected collections from customers

Details

Jan

Feb

Mar

Total sales

$ 195,000

$ 229,400

$ 277,500

Sales- Cash

$    58,500

$    68,820

$    83,250

Sales - Credit

$ 136,500

$ 160,580

$ 194,250

Collection from customers- 10% for the month

$    13,650

$    16,058

$    19,425

Collection from customers- 40% for the month following

$    54,600

$    64,232

Collection from customers- 46% for the second month following

$    73,867

Total collections from customers

$    72,150

$ 139,478

$ 240,774

Therefore, total collections form customers are $240,774 in the March.

Prepare a schedule of expected payments for direct materials for March:

LRF Company

Expected collections from customers

Details

Jan

Feb

Mar

Total purchases

$    28,100

$    32,600

$    38,700

Purchase- Cash

$    14,050

$    16,300

$    19,350

Purchase- Credit

$    14,050

$    16,300

$    19,350

Purchase- 40% for the month

$      5,620

$     6,520

$      7,740

Purchase- 60% for the following month

$      8,430

$      9,780

Total expected payments

$    19,670

$    31,250

$    36,870

Therefore, expected payments for the month of March are $36,870.

LRF Company

Expected collections from customers

Details

Jan

Feb

Mar

Total sales

$ 195,000

$ 229,400

$ 277,500

Sales- Cash

$    58,500

$    68,820

$    83,250

Sales - Credit

$ 136,500

$ 160,580

$ 194,250

Collection from customers- 10% for the month

$    13,650

$    16,058

$    19,425

Collection from customers- 40% for the month following

$    54,600

$    64,232

Collection from customers- 46% for the second month following

$    73,867

Total collections from customers

$    72,150

$ 139,478

$ 240,774