Question

Question 4 Crane Company prepares monthly cash budgets. Relevant data from operating budgets for 2020 are as follows. Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January $446,400 148,800 111,600 86,800 97,960 February $496,000 155,000 124,000 93,000 105,400 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 $1,240 of depreciation per month. Other data: 1. 2. 3. Credit sales: November 2019, $310,000; December 2019, $396,800. Purchases of direct materials: December 2019, $124,000. Other receipts: January-Collection of December 31, 2019, notes receivable $18,600; February-Proceeds from sale of securities $7,440. Other disbursements: February-Payment of $7,440 cash dividend. 4. The company's cash balance on January 1, 2020, is expected to be $74,400. The company wants to maintain a minimum cash balance of $62,000.

Answer 1

D 1 2 Cash Collection from Sales January February Cash collection from Current month sales $2,23,200.00 $2,48,000.00 30% Cash collection from Previous month's sales $ 1,19,040.00 $1,33,920.00 Cash collection from Past Sales $ 62,000.00 $ 79,360.00 Total Cash collection from Sales $4,04,240.00 $4,61,280.00 А B C Crane Company Cash Budget January February 4 Beginning Cash balance $ 74,400.00 $ 63,240.00 5 Add: Cash receipts: 6 Cash collection from Sales $ 4,04,240.00 $ 4,61,280.00 7 Collection of Notes receivables $ 18,600.00 8 Proceeds from Sale of Securities $ 7,440.00 9 Total cash collection $ 4,22,840.00 $ 4,68,720.00 10 Total cash available $ 4,97,240.00 $ 5,31,960.00 11 Less: Cash disbursements 12 Payment for Direct Material Purchase $ 1,38,880.00 $ 1,52,520.00 13 Payment for Direct Labor $ 1,11,600.00 $ 1,24,000.00 14 Manufacturing Overhead $ 86,800.00 $ 93,000.00 15 Selling and Admin Expenses (Excluding Depreciati $ 96,720.00 $ 1,04,160.00 16 Cash Dividend $ 7,440.00 17 Total Cash disbursement $ 4,34,000.00 $ 4,81,120.00 18 Excess cash available $ 63,240.00 $ 50,840.00 19 Financing: 20 Borrowings - $ 11,160.00 21 Ending balance $ 63,240.00 $ 62,000.00 Payment for Direct Material Purchase January February Payment in the month of Purchase $ 89,280.00 $ 93,000.00 Payment in following the month of Purchase $ 49,600.00 $ 59,520.00 Total Payment for Material Purchase $1,38,880.00 $1,52,520.00

C 1 Cash Collection from Sales January Cash collection from Current month sales =446400*50% 30% Cash collection from Previous month's sales =396800*30% Cash collection from Past Sales =310000* 20% Total Cash collection from Sales =SUM(F6:F8) February -496000*50% =446400*30% =396800* 20% ESUM(G6:48) Crane Company Cash Budget 3 January February 4 Beginning Cash balance 74400 =B21 5 Add: Cash receipts: 6 Cash collection from Sales =F9 =G9 7 Collection of Notes receivables 18600 8 Proceeds from Sale of Securities 7440 9 Total cash collection =SUM(B6:38) =SUM(C6:08) 10 Total cash available =B4+B9 =C4+C9 11 Less: Cash disbursements 12 Payment for Direct Material Purchase =F16 =G16 13 Payment for Direct Labor 111600 124000 14 Manufacturing Overhead 86800 93000 15 Selling and Admin Expenses (Excluding Depreciation) =97960-1240 = 105400-1240 16 Cash Dividend 7440 17 Total Cash disbursement =SUM(B12:B16) =SUM(C12:C16) 18 Excess cash available =B10-B17 =C10-C17 19 Financing: 20 Borrowings =C21-C18 21 Ending balance =B18+B20 62000 Payment for Direct Material Purchase January February Payment in the month of Purchase =148800*60% = 155000*60% Payment in following the month of Purchase =124000*40% =148800*40% Total Payment for Material Purchase =SUM(F14:F15) =SUM(G14:615)

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