Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows. .............................................January
Question:
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows.
.............................................January .....................February
Sales........................................$360,000..................... $400,000
Direct materials purchases.................120,000........................125,000
Direct labor....................................90,000....................... 100,000
Manufacturing overhead.....................70,000........................ 75,000
Selling and administrative expenses...... 79,000......................... 85,000
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,000 of depreciation per month.
Other data:
1.Credit sales: November 2016, $250,000; December 2016, $320,000.
2.Purchases of direct materials: December 2016, $100,000.
3.Other receipts: January-collection of December 31, 2016, notes receivable $15,000; February-proceeds from sale of securities $6,000.
4.Other disbursements: February-payment of $6,000 cash dividend.
The company's cash balance on January 1, 2017, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.
Instructions
(a) January: collections $326,000 payments $112,000
(b) Ending cash balance: January $51,000 February $50,000
(a) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.
(b) Prepare a cash budget for January and February in columnar form.
Prepare purchases and income statement budgets for a merchandiser.
Cash BudgetA cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the...
Step by Step Answer:
Accounting Principles
ISBN: 978-1118875056
12th edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso