Problem 23-4A January February Expected Collections from Customers January Febru
ID: 2556172 • Letter: P
Question
Problem 23-4A
January
February
Expected Collections from Customers
January
February
Expected Payments for Direct Materials
January
February
Prepare a cash budget for January and February in columnar form.
Problem 23-4A
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: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 88,740All 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:
1. Credit sales: November 2016, $261,000; December 2016, $334,080. 2. Purchases of direct materials: December 2016, $104,400. 3. Other receipts: January—Collection of December 31, 2016, notes receivable $15,660; February—Proceeds from sale of securities $6,264. 4. Other disbursements: February—Payment of $6,264 cash dividend.
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 $52,200.
Explanation / Answer
Schedule I
Expected Collections from Customers
Details
January ($)
February ($)
Comments
From Nov Sales
52,200
20% of Nov sales are expected to be realised in Jan
From Dec Sales
1,00,224
66,816
30% of Dec sales are expected to be realised in Jan & 20% in Feb.
From Jan Sales
1,87,920
1,12,752
50% of Jan sales are expected to be realised in Jan & 30% in Feb
From Feb Sales
-
2,08,800
50% of Feb sales are expected to be realised in Feb
Total Collections
3,40,344
3,88,368
Schedule II
Expected Payments for Direct Materials
Details
January ($)
February ($)
Comments
For Dec Month direct material purchases
41,760
-
40% of Dec month direct material purchases has to be paid in Jan
For Jan Month direct material purchases
75,168
50,112
60% of Jan month direct material purchase is to be paid in Jan & rest 40% in Feb.
For Feb Month direct material purchases
-
78,300
60% of Feb month direct material purchase is to be paid in Feb
Total Payments for Direct Material
1,16,928
1,28,412
Cash Budget for Jan & Feb in Columnar Format
Details
January ($)
February ($)
Comments
Opening Cash Balance
62,640
53,244
Cash Bal on Jan 1st taken as Opening Cash Balance for Jan Month & Feb Opening Cash Balance is derived from Closing Jan Balance
Add: Expected Collections from Customers
3,40,344
3,88,368
As per Schedule I
Add: Notes Receivables
15,660
-
Add: Sale of Securities
-
6,264
Total Cash Available for use
4,18,644
4,47,876
Less : Direct Material
-1,16,928
-1,28,412
As per Schedule II
Less : Direct Labor
-93,960
-1,04,400
Less : Manufacturing Overhead
-73,080
-78,300
Less : Selling & Administrative Expenditure
-81432
-87,696
Reduce Depreciation from Selling & Administrative expenditure because it is a non cash expenditure (82,476-1,044=81,432) & (88,740-1,044=87,696)
Less : Cash Dividend
-
-6,264
Closing Cash Balance
53,244
42,804
Schedule I
Expected Collections from Customers
Details
January ($)
February ($)
Comments
From Nov Sales
52,200
20% of Nov sales are expected to be realised in Jan
From Dec Sales
1,00,224
66,816
30% of Dec sales are expected to be realised in Jan & 20% in Feb.
From Jan Sales
1,87,920
1,12,752
50% of Jan sales are expected to be realised in Jan & 30% in Feb
From Feb Sales
-
2,08,800
50% of Feb sales are expected to be realised in Feb
Total Collections
3,40,344
3,88,368
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