Question

Please explain solutions

Exercise 9-17

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

		Budgeted Sales		Budgeted D.M. Purchases
January		$261,300		$39,300
February		250,800		43,300
March		344,000		44,000

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. (Round answers to 0 decimal places, e.g. 2,500.)

NIETO COMPANY Expected Collections from Customers
		March
March cash salesCollection of March credit salesCollection of February credit salesCollection of January credit salesJanuary cash salesPayment of February credit purchasesFebruary cash salesMarch cash purchasesPayment of March credit purchases		$
Collection of January credit salesJanuary cash salesCollection of March credit salesCollection of February credit salesMarch cash purchasesPayment of March credit purchasesFebruary cash salesMarch cash salesPayment of February credit purchases
Payment of March credit purchasesCollection of February credit salesCollection of January credit salesFebruary cash salesJanuary cash salesMarch cash purchasesMarch cash salesPayment of February credit purchasesCollection of March credit sales
March cash purchasesMarch cash salesPayment of February credit purchasesCollection of March credit salesCollection of February credit salesCollection of January credit salesPayment of March credit purchasesFebruary cash salesJanuary cash sales
Total collections		$

(b)

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

NIETO COMPANY Expected Payments for Direct Materials
		March
Collection of January credit salesFebruary cash salesMarch cash purchasesPayment of March credit purchasesPayment of February credit purchasesJanuary cash salesMarch cash salesCollection of March credit salesCollection of February credit sales		$
Collection of January credit salesMarch cash salesFebruary cash salesCollection of March credit salesCollection of February credit salesMarch cash purchasesJanuary cash salesPayment of February credit purchasesPayment of March credit purchases
Collection of February credit salesPayment of March credit purchasesCollection of January credit salesMarch cash salesPayment of February credit purchasesMarch cash purchasesCollection of March credit salesFebruary cash salesJanuary cash sales
Total payments		$

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Answer 1

SOLUTION

A.

NIETO COMPANY

Expected Collections from customers

Particulars	Calculations	Amount ($)
March cash sales	(30% * $344,000)	103,200
Collection of March credit sales	[(70% * $344,000) *10%]	24,080
Collection of February credit sales	[(70% * $250,800) *50%]	87,780
Collection of January credit sales	[(70% * $261,300) *36%]	65,848
Total collections		280,908

B.

NIETO COMPANY

Expected Payments for direct materials

Particulars	Calculations	Amount ($)
March cash purchases	(50% * $44,000)	22,000
Payment of March credit purchases	[(50% * $44,000) *40%]	8,800
Payment of February credit purchases	[(50% * $43,300) *60%]	12,990
Total Payments		43,790