Question

Exercise 22-17 Nieto Company’s budgeted sales and direct materials purchases are as follows. Budgeted Sales Budgeted D.M. Purchases January $274,000 $37,700 February 233,300 40,600 March 296,500 52,000 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. Prepare a schedule of expected collections from customers for March.

Answer 1

Explanation:

The preparation of the schedule of expected collections from customers for March is presented below:

                                              Nieto Company’s

                             Expected Collections from customers

Particulars                     Calculations                     Amount ($)

March cash sales          (30% × $296,500)                $88,950

Collection of March credit sales [(70% × $296,500) × 10%]        $20,755

Collection of February credit sales [(70% ×  $233,300) × 50%] $81,655

Collection of January credit sales [(70% × $274,000) × 36%] $69,048

Total collections                                                                        $260,408