Question

Exercise 22-14 (Video) Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: January $50,000, February $75,000. Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,500 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $12,000 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000. Prepare a cash budget for January and February.

Answer 1

B5 X for DANNER COMPANY cash budget for January and February January $ 45,000 February $27,500 $ 85,000 $ 12,000 $ 97,000 $ 142,000 $150,000 $0 $ 150,000 $177,500 beginning cash balance add: cash collections collections from customers from sale of marketable securities total cash collections total cash available less: cash disbursements payments for direct materials payments for direct labor payments for manufacturing overhead payments for selling and administrative expenses total cash disbursements net available cash balance $50,000 $ 30,000 $ 75,000 $ 45,000 $ 23,500 $ 20,000 $ 163,500 $ 14,000 $ 19,500 $ 15,000 $ 114,500 $ 27,500 $0 | $6,000 add: amount borrowed less: amount repaid ending cash balance $0 $ 0 $ 27,500 $20,000

for formulas and calculations, refer to the image below -

B5 x ✓ fx В DANNER COMPANY cash budget for January and February January February 45000 =C21 85000 150000 12000 =C8+C9 beginning cash balance add: cash collections collections from customers from sale of marketable securities total cash collections total cash available less: cash disbursements payments for direct materials payments for direct labor payments for manufacturing overhead payments for selling and administrative expenses =D8+D9 =D6+D10 =C6+C10 45000 50000 75000 30000 =21000-1500 =25000-1500 15000 20000 =SUM(C13:016) SUM(D13:016) =C11-C17 =D11-017 6000 total cash disbursements net available cash balance add: amount borrowed less: amount repaid ending cash balance =C18+C19-C20 =D18+D19-D20

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