The controller of Harrington Company estimates sales and production for the first four months of 2022 as
Question:
The controller of Harrington Company estimates sales and production for the first four months of 2022 as follows:
Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 4 kg of direct materials to produce a finished unit, and direct materials cost $5 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase and 60% the following month. Ending direct materials inventory for each month is 40% of the next month’s production needs. January’s beginning materials inventory is 1,080 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.
Instructions
a. What are the total cash sales for the January–March quarter?
b. What is the accounts receivable balance at the end of March?
c. What is the direct materials inventory balance at the end of March?
d. What are the materials purchases costs for February?
e. What are the cash payments on account for February?
f. What is the ending balance in accounts payable for March?
g. What is the change in the cash balance for the period January–March?
Step by Step Answer:
Managerial Accounting Tools For Business Decision Making
ISBN: 9781119731825
6th Canadian Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Ibrahim M. Aly, Donald E. Kieso