Use the following to answer questions 1&2 Athens Manufacturing Company has budge

Question

Use the following to answer questions 1&2 Athens Manufacturing Company has budgeted the following raw material purchases for the last four months of the year September October $850,000 $810,000 $780,000 At Athens, 25% of raw materials purchases are normally paid for in the month of purchase. The remaining 75% is paid for in the month following the purchase. Use the following to answer questions 3 &4: Rome Company will open a new store on January 1. Based on experience from its other retail out Rome is making the following sales projections: Cash Sales Credit Sales $40,000 $50,000 $40,000 $60,000 $40,000 $80,000 January. February... $60,000 $30,000 April. Rome Company estimates that 70% of the credit sales will be collected in the month following t month of sale, and the remaining 30% will be collected in the second month following the month sale.

Explanation / Answer

1.3

A.$75,000.

accounts receivable balance as on march 31 = credit sales of march + 30% of credit sales of february.

=>$60,000 + ($50,000)*30%

=$60,000 + 15,000

=>$75,000.

1.4.

D.$97,000.

cash receipts in april = april cash sales + 70% of march credit sales + 30% of february credit sales

=>$40,000 + ($60,000)*70% + ($50,000)*30%

=>$40,000 + $42,000 +$15,000

=>$97,000.

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