Lorch Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: All

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Lorch Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows:


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All sales are on account. Lorch expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. Other data are as follows: 


1. Credit sales: November 2022, $200,000; December 2022, $280,000 


2. Purchases of direct materials: December 2022, $90,000.


3. Other receipts: January—collection of December 31, 2022, notes receivable $5,000; February— proceeds from sale of securities $6,000.


4. Other disbursements: February—payment of $20,000 for land.


The company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a minimum cash balance of $40,000. 



Instructions 


a. Prepare schedules for 


(1) The expected collections from customers


(2) The expected payments for direct materials purchases.


b. Prepare a cash budget for January and February using columns for each month.

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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

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