Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lorch Company prepares monthly cash budgets. Relevant data from operating budgets for 2021 are as follows: January February Sales $352,000 $398,000 Direct materials purchases

 image text in transcribed 
 
image text in transcribed
 
image text in transcribed
 
image text in transcribed
 
image text in transcribed
 
image text in transcribed
 
image text in transcribed

Lorch Company prepares monthly cash budgets. Relevant data from operating budgets for 2021 are as follows: January February Sales $352,000 $398,000 Direct materials purchases 121,000 110,000 Direct labour 85,000 112,000 Manufacturing overhead 60,000 76,000 Selling and administrative expenses 75,000 80,000 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 2020, $202,000; December 2020, $278,000 2. Purchases of direct materials: December 2020, $91.000 3. Other receipts: January-collection of December 31, 2020, notes receivable $6,000; 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, 2021, to be $50,000. It wants to maintain a minimum cash balance of $40,000. Prepare schedules for (1) the expected collections from customers. Month November December January February SA January February $ $ $ LA (2) the expected payments for direct materials purchases. Month January February December $ $ January February $ $ Prepare a cash budget for January and February using columns for each month. LORCH COMPANY Cash Budget For the Two Months Ending February 28, 2021 Jan Beginning cash balance Add: Cash receipts Total receipts Total available cash Less: Disbursements Feb Total available cash Less: Disbursements Total disbursements Excess of cash available over cash disbursements Financing: Borrowing Excess of cash available over cash disbursements Financing: Borrowing Total financing Ending cash balance

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Lets begin by preparing the schedules for 1 The expected collections from customers 2 The expected payments for direct materials purchases 3 The cash budget for January and February 2021 Step 1 Expect... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance For Non-Finance Executives

Authors: Anurag Singal

1st Edition

1952538327, 9781952538322

More Books

Students also viewed these Accounting questions