The next two questions are based on the following and cash collections for the L

Question

The next two questions are based on the following and cash collections for the Lchman Corporation for Quarter 1 are listed below: January $125.000 March $85,000 $195,000 $280,000 Budgeted sales Cash Sales Credit Sales Total Sales February S100,000 $260,000 $360,000 Collections on credit sales are as follows Month of sale Month after sake 2nd month after sale 60% 30% 10% December sales and $100,000 The accounts recivable bulance on lamury I is $175,000 of which $75,000 represents uncolle represents uncollected November sales 7 If the total cash collected in March was $321,500, then total January sales must have been $415.000 5540,000 A. B. C $1,390,000 D. E. None of the above $41,500 8 If January credit sales were $400,000, (ignore any answer derived for previous question), the accounts receivable balance as of the of January would be 518,750 $198.750 A. B. $160000 5178.750 E None of the above D.

Explanation / Answer

Q7. Answer is E. None of above. Explanation: EXPECTED CASH COLLECTIONS JAN FEB MARCH QUARTER November sales collections 100,000 100,000 December sales collections 56,250 18750 75,000 Cash sales of all three months 125000 100000 85000 310,000 Jan Sales collection Feb sales collections 156,000 78,000 234,000 March sales collection 51000 51,000 Total Cash Collections 281,250 274,750 214,000 770,000 Now, Total Collections of March as per problem: 321500 Less: Colelction of march without Jan sales 214000 Collections from jan sales (which is 10% of Credit sales) 107500 Credit sales of jan (107500/10%) 1,075,000 Add: Cash Sales 125,000 Total Sales 1,200,000 Q8. Answer is D. $ 178,750 Explanation: Accounts receivable at the end of Jan: Accounts receivable from Dec Sales (75000/4) 18750 Accounts receivable from jan credit sales (400,000*40%) 160,000 Total Accounts receivable on jan31 178750

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