Sales Are 30% Cash and 70% on Account, and 60

question 29

Multiple Choice

$$\begin{array} { l c c c c c } & \text { January } & \text { February } & \text { March } & { \text { April } } \\\text { Sales } & \$ 26,400 & \$ 23,100 & \$ 33,000 & \$ 25,000 \\\text { Production in units } & 990 & 1,440 & 1,710 & 1,200\end{array}$$ Sales are 30% cash and 70% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 30% of credit sales are collected. The remainder is collected two months after the sale. It takes 4 kilograms of direct material to produce a finished unit, and direct materials cost $5 per kilogram. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 50% the following month, and 10% in the second month following the purchase. Ending direct materials inventory for each month is 40% of the next month's production needs. January's beginning materials inventory is 1,080 kilograms. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.
(Appendix 10A) The net change in cash for the period January - March is:

• A) $4,500 decrease
• B) $339 increase
• C) $5,811 increase
• D) $1,222 decrease

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Definitions:

Jointly and Severally

A legal term indicating that parties can be held responsible together or individually for a debt or obligation.

Limited Partnership (LP)

A Limited Partnership (LP) is a form of partnership consisting of at least one general partner, who manages the business and is personally liable, and one or more limited partners, who contribute capital and share in profits but have limited liabilities.

Jointly Liable

A legal term indicating that two or more parties are equally responsible for the fulfillment of a liability or debt.

UPA

stands for Uniform Partnership Act, which is a set of laws adopted by some states in the United States to govern the formation, operation, and dissolution of partnerships.