Question

Problem 21-4A

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

Problem 21-4A Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January $411,120 137,040 102,780 79,940 90,218 February $456,800 142,750 114,200 85,650 97,070 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 $1,142 of depreciation per month Other data: 1. 2. 3. Credit sales: November 2016, $285,500; December 2016, $365,440. Purchases of direct materials: December 2016, $114,200. Other receipts: January-Collection of December 31, 2016, notes receivable $17,130; February-Proceeds from sale of securities $6,852. Other disbursements: February-Payment of $6,852 cash dividend. 4. The company's cash balance on January 1, 2017, is expected to be $68,520. The company wants to maintain a minimum cash balance of $57,100. Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February. Expected Collections from Customers January February November December January February

Answer 1

Answer -

(1) Answer -

Expected Collections from Customers
	January	February
November	$57000	$0
December	$109632	$73088
January	$205560	$123336
February	$0	$228400
Total collections	$372192	$424824

Calculation:

November

= $285000 * 20%

= $57000 (Collected in January)

December

= $365440 * 30%

= $109632 (Collected in January)

= $365440 * 20%

= $73088 (Collected in February)

January

= $411120 * 50%

= $205560 (Collected in January)

= $411120 * 30%

= $123336 (Collected in February)

February

= $456800 * 50%

= $228400 (Collected in February)

(2) Answer -

Expected Payments for Direct Materials
	January	February
December	$45680	$0
January	$82224	$54816
February	$0	$85650
Total payments	$127904	$140466

Calculation:

December

= $114200 * 40%

= $45680 (Payment in January)

January

= $137040 * 60%

= $82224 (Payment in January)

= $137040 * 40%

= $54816 (Payment in February)

February

= $142750 * 60%

= $85650 (Payment in February)

(3) Answer -

COLTER COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
	January	February
Beginning cash balance	$68520	$58142
Add: Receipts
Collection from customers	$372192	$424824
Notes receivable	$17130
Sale of securities		$6852
Total receipts	$389322	$431676
Total available cash	$457842	$489818
Less: Disbursements
Direct materials	$127904	$140466
Direct labor	$102780	$114200
Manufacturing overhead	$79940	$85650
Selling and administrative expenses	$89076	$95928
Cash dividend		$6852
Total disbursements	$399700	$443096
Excess (Deficiency) of available cash over cash disbursements	$58142	$46722
Financing:
Add: Borrowings	$0	$10378
Less: repayments	$0
Ending balance	$58142	$57100

Calculation:

Selling and administrative expenses

For January

= $90218 - $1142 (Depreciation)

= $89076

For February

= $97070 - $1142 (Depreciation)

= $95928