Knight Company€™s budget committee provides the following information:

Requirements
1. Prepare the schedule of cash receipts from customers for January and February 2016. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.
2. Prepare the schedule of cash payments for purchases for January and February 2016. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.
3. Prepare the schedule of cash payments for selling and administrative expense for January and February 2016. Assume 25% of the accrual for Salaries and Commissions Payable is for commissions and 75% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.
4. Prepare the cash budget for January and February. Assume no financing took place.

Transcribed Image Text:

December 31, 2015, account balances: Cash Accounts Receivable Merchandse Inventory Accounts Payable Salaries and Commissions Payable 28,000 20,000 18,500 18,000 8,400 February 61,200 30,750 3,060 7,000 3,000 500 200 1,600 Budgeted amounts for 2016 Sales Purchases Commissions Expense Salaries Expense Rent Expense Depreciation Expense Insurance Expense Income Tax Expense January $60,000 30,150 3,000 7,000 3,000 500 200 1,600