Exercise 9-14 Danner Company expects to have a cash balance of $51,300 on Januar

Question

Exercise 9-14

Danner Company expects to have a cash balance of $51,300 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows.

Sales of marketable securities in January are expected to realize $13,680 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $28,500. The company wants to maintain a minimum monthly cash balance of $22,800.

Prepare a cash budget for January and February. (Do not leave any answer field blank. Enter 0 for amounts.)

January

February

Collections from customers: January $96,900, February $171,000. Payments for direct materials: January $57,000, February $85,500. Direct labor: January $34,200, February $51,300. Wages are paid in the month they are incurred. Manufacturing overhead: January $23,940, February $28,500. These costs include depreciation of $1,710 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $17,100, February $22,800. These costs are exclusive of depreciation. They are paid as incurred.

Explanation / Answer

Particulars January February Opening Balance 51,300 31,350 A) Receipts: Collections from customers 96,900 171,000 Sale of Marketable Securities 13,680 - B) Payments: Payments for Direct Materials 57,000 85,500 Payments for Direct Labor 34,200 51,300 Payments of Manufacturing overheads 22,230 26,790 Selling and administrative expenses 17,100 22,800 Closing Balance before Borrowings 31,350 15,960 Add: Borrowings - 6,840 Closing Balance 31,350 22,800

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