Question

Question 11 --/20 View Policies Current Attempt in Progress Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2020 are as follows. January February Sales Direct materials purchases $378,000 126,000 94,500 73,500 $420,000 131,250 105,000 78,750 Direct labor Manufacturing overhead Selling and administrative expenses 82,950 89,250 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 $1,050 of depreciation per month. Other data: 1. Credit sales: November 2019, $262,500; December 2019, $336,000. 2. Purchases of direct materials: December 2019, $105,000. 3. Other receipts: January-Collection of December 31, 2019, notes receivable $15,750; February-Proceeds from sale of securities $6,300. 4. Other disbursements: February-Payment of $6,300 cash dividend. The company's cash balance on January 1, 2020, is expected to be $63,000. The company wants to maintain a minimum cash balance of $52,500.

Answer 1

Schedule of expected cash collections from customers is shown as follows:- (Amounts in $)

Expected Collection from Customers
	January	February
November (20% in Jan)	52,500 (262,500*20%)	0
December (30% in Jan and 20% in Feb)	100,800 (336,000*30%)	67,200 (336,000*20%)
January (50% in Jan and 30% in Feb)	189,000 (378,000*50%)	113,400 (378,000*30%)
February (50% in Feb)	0	210,000 (420,000*50%)
Total collections	342,300	390,600

Schedule of expected payments for direct materials is shown as follows:- (Amounts in $)

Expected Payments for Direct Materials
	January	February
December (40% in Jan)	42,000 (105,000*40%)	0
January (60% in Jan and 40% in Feb)	75,600 (126,000*60%)	50,400 (126,000*40%)
February (60% in Feb)	0	78,750 (131,250*60%)
Total payments	117,600	129,150

Cash Budget for The Month of January and February is shown as follows:- (Amounts in $)

COLTER COMPANY
Cash Budget
For The Month of January and February
	January	February
Total cash collections (A)	342,300	390,600
Add: Other Cash Receipts
Collections of notes receivable	15,750	0
Proceeds from sale of securities	0	6,300
Total other cash receipts (B)	15,750	6,300
Total Cash Available (C = A+B)	358,050	396,900
Less: Cash Payments
Payments for Purchases	117,600	129,150
Direct Labor	94,500	105,000
Manufacturing Overhead	73,500	78,750
Selling and Administrative Expenses (except depreciation)	81,900 (82,950-1,050)	88,200 (89,250-1,050)
Cash Dividends	0	6,300
Total Cash Payments (D)	367,500	407,400
Excess (or Deficiency) of Cash (E = C-D)	(9,450)	(10,500)
Beginning Cash Balance (F)	63,000	53,550
Ending Cash Balance (E+F)	53,550	43,050