Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2020 are as follows. All

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Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2020 are as follows.

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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 2019, $250,000; December 2019, $320,000.

2. Purchases of direct materials: December 2019, $100,000.

3. Other receipts: January?collection of December 31, 2019, 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, 2020, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.

Instructions

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.

Cash Budget
A 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...
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Related Book For  book-img-for-question

Financial and Managerial Accounting

ISBN: 978-1119392132

3rd edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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