Problem 23-4A Colter Company prepares monthly cash budgets. Relevant data from o

Question

Problem 23-4A

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows:

January

February

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 $1,044 of depreciation per month.

Other data:

The company’s cash balance on January 1, 2017, is expected to be $62,640. The company wants to maintain a minimum cash balance of $52,200

Prepare a cash budget for January and February in columnar form. (Do not leave any answer field blank. Enter 0 for amounts.)
- need excess (deficeinecy) of available cash over cash disbrustments

Need Add: borrowing

need - add: repayments and ending cash balance

January

February

Sales $375,840 $417,600 Direct materials purchases 125,280 130,500 Direct labor 93,960 104,400 Manufacturing overhead 73,080 78,300 Selling and administrative expenses 82,476 88,740

Explanation / Answer

Colter Company

Cash Budget –

Colter Company

Cash Budget

for the two months - January and February

January

February

Beginning Cash balance

$62,640

$53,244

Add: Cash receipts

collections from customers

$340,344

$388,368

Notes Receivable

$15,660

Sale of securities

$6,264

Total receipts

$356,004

$394,632

Available cash

$418,644

$447,876

Less: Disbursements:

Direct material purchases

$116,928

$128,412

Direct labor

$93,960

104,400

Manufacturing overhead

$73,080

$78,300

selling and administrative expenses

$81,432

$87,696

Cash dividend

$6,264

Total disbursements

$365,400

$405,072

Excess/(deficiency) of available cash over disbursements

$53,244

$42,804

minimum balance

$52,200

$52,200

Financing -

Borrowings

$9,396

Repayments

Ending cash balance

$53,244

$52,200

Workings –

Collections from customers -

January

February

November sales collections

$52,200

December sales collections

$100,224

$66,816

January sales

$187,920

$112,752

February sales collections

$208,800

Total collections from customers

$340,344

$388,368

Payments for direct materials -

January

February

December purchases

$41,760

January Purchases

$75,168

$50,112

February Purchases

$78,300

Total payments for purchases

$116,928

$128,412

Notes:

The selling and administrative expenses item is shown excluding the non-cash expense - monthly depreciation of $1,044.

Colter Company

Cash Budget

for the two months - January and February

January

February

Beginning Cash balance

$62,640

$53,244

Add: Cash receipts

collections from customers

$340,344

$388,368

Notes Receivable

$15,660

Sale of securities

$6,264

Total receipts

$356,004

$394,632

Available cash

$418,644

$447,876

Less: Disbursements:

Direct material purchases

$116,928

$128,412

Direct labor

$93,960

104,400

Manufacturing overhead

$73,080

$78,300

selling and administrative expenses

$81,432

$87,696

Cash dividend

$6,264

Total disbursements

$365,400

$405,072

Excess/(deficiency) of available cash over disbursements

$53,244

$42,804

minimum balance

$52,200

$52,200

Financing -

Borrowings

$9,396

Repayments

Ending cash balance

$53,244

$52,200

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