The next two questions are based on the following Budgeted s

The next two questions are based on the following Budgeted sales and cash collections for the Lehman Corporation for Quarter I are listed below: Cash Sales Credit Sales Total January $125.000 42Soo February S100,000 S260,000 S 5000 March $85.000 $195,000 S280,000 Collections on credit sales are as follows: Month of sale Month after sale 2nd month after sale 60% 30% 10% The accounts receivable halance on January I is $175,000, of which $75,000 represents uncollected December sales and $100,000 represents uncollected November sales 7 If the lotal cash collected in March was $322.500, then total January sales must have been: $550,000 S425,000 C $1400,000 D. E. None of the above $42.500 answer derived for previous question), the accounts receivable balance as of the deri 8 If January credit sales were $200,000, (ignore any of January would be: A. $18,750 $98.750 $198,750 E. None of the above March F eb ???- an Ca sh 2 s0oo Home End Prtscn F5 8 4

Solution

Solution 7) Answer is the “ C “ option i.e = $ 14,00,000

      TOTAL SALES FOR THE MONTH OF JANUARY

     Total Cash Collected in March was $ 3,22,500

     $ 3,22,500= 10%(Jan Credit Sales)+ 30%( Feb credit sales) + 60%( March credit sales)

      $ 3,22,500 = 10 %(Jan Credit sales)+ 0.3( 2,60,000)+ 0.6( 1,95,000)

      $ 3,22,500= 0.1( jan credit sales)+78,000+ 1,17,000

      $ 3,22,500- $ 1,95,000= 0.1( Jan Credit Sales)

January Credit Sales=$ 12,75,000

Therefore Total Sales= Credit Sales+ Cash Sales

                                     =$ 12,75,000 + $ 1,25,000=$ 14,00,000

Total Sales of January= $ 14,00,000

Solution 8: Answer is “ E” option i.e None of the Above

The Accounts Receivable at the end of January is as follows:

Credit Sales of January =$ 2,00,000

The Accounts Receivable at the end of Jan would be as follows:

= 10% (Dec Credit Sales)+ 40%( Jan Credit Sales)

Since cash collected of December’s uncollected credit sales in the month of January which was outstanding in the beginning of January =$ 75,000( This is 30% of December’s credit sales)

Therefore 10% of December’s Credit Sale is still to be receivable at the end of January

Therefore Accounts Receivable at the end of Jan= 0.1/0.3( $ 75,000)+ 0.4($2,00,000)

                                                                                         =$ 25,000+ $ 80,000

                                                                                          = $ 1,05,000