Question

Nieto Company's budgeted sales and direct materials purchases are as follows. Budgeted D.M. Purchases Budgeted Sales $251,000 $32,200 January February 238,100 45,300 March 299,600 38,300 Nieto'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. Nieto'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. (a) Prepare a schedule of expected collections from customers for March. NIETO COMPANY Expected Collections from Customers March $ Total collections $ (b) Prepare a schedule of expected payments for direct materials for March. NIETO COMPANY Expected Payments for Direct Materials March $ Total payments

Answer 1

Cash sales Credit sales Total sales Sales Budget January February $ 75,300 $ 71,430$ $ 175,700 $ 166,670 $ $ 251,000 $ 238,100 $ March January February March 89,880 ($ 251,000 * 30%) ($ 238,100 * 30%) ($ 299,600 * 30%) 209,720 ($ 251,000 * 70%) ($ 238,100 * 70%) ($ 299,600 * 70%) 299,600 NIETO COMPANY Expected Collections from Customer March Workings Cash sales - March $ 89,880 (refer workings above) Collection of January sales $ 63,252 ($ 175,700 * 36%) Collection of February sales $ 83,335 ($ 166,670 * 50%) Collection of March sales $ 20,972 ($ 209,720 * 10%) Total Collections $ 257,439 NIETO COMPANY Expected Payments for Direct Materials March Workings Cash purchase - March $ 19,150 (refer workings below) Payment for February purchase $ 13,590 ($ 22,650 * 60%) Payment for March purchase $ 7,660 ($ 19,150 * 40%) Total Payments $ 40,400 Cash Purchase Credit Purchase Total sales Purchase Budget February March February March $ 22,650 $ 19,150 ($ 45,300 * 50%) ($ 38,300 * 50%) $ 22,650 $ 19,150 ($ 45,300 * 50%) ($ 38,300 * 50%) $ 45,300 $ 38,300