Question

Problem 21-4A (Part Level Submission)

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

		January		February
Sales		$405,360		$450,400
Direct materials purchases		135,120		140,750
Direct labor		101,340		112,600
Manufacturing overhead		78,820		84,450
Selling and administrative expenses		88,954		95,710

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 $1,126 of depreciation per month.

Other data:

1.		Credit sales: November 2016, $281,500; December 2016, $360,320.
2.		Purchases of direct materials: December 2016, $112,600.
3.		Other receipts: January—Collection of December 31, 2016, notes receivable $16,890;
		February—Proceeds from sale of securities $6,756.
4.		Other disbursements: February—Payment of $6,756 cash dividend.

The company’s cash balance on January 1, 2017, is expected to be $67,560. The company wants to maintain a minimum cash balance of $56,300.

A)

(a)

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
Total collections		$		$

Expected Payments for Direct Materials
		January		February
December		$		$
January
February
Total payments		$		$

1*Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

2*Prepare a cash budget for January and February in columnar form.

Answer 1

Expected Collections from Customers
				Jan	Feb
November	(281,500*20%)			56300
December	(360,320*30%;20%)			108096	72064
January	(405,360*50%;30%)			202680	121608
February	(450,400*50%)				225200
Total collections				367076	418872
expected payment for Direct materials
				Jan	Feb
December	(112,600*40%)			45040
January	(135,120*60%;40%)			81072	54048
February	(140,750*60%)				84450
total payments				126112	138498
	Cash budget
				Jan	Feb
opening cash balance				67,560	57,426
Add:Receipts
cash collection				367076	418872
collection of note receivable				16,890	0
sale of securities				0	6,756
total receipts				383966	425628
total cash available				451,526	483054
less:Cash disbursement
cash paid for direct materials				126112	138498
cash paid for direct labor				101,340	112,600
cash paid for manufacturing overhead				78,820	84,450
Selling and administrative expense				87828	94584
Cash dividend					6,756
total cash disbursement				394100	436888
Excess(Deficiency)				57,426	46166
financing
Add:borrowings				0	10134
less:Repayments				0
Cash balance				57,426	56300