Question

Lorch Company prepares monthly cash budgets. Relevant data from operoting budgets for 2013 are as follows: January February S349.900 404,900 119,700 108,900 84,970 11,510 74,850 79,140 Sales Direct materials purchases Dirert labour 59,740 Selling and administrative expenses74,900 All sales are on account. Lorch expects collections to be 50% in the month or sale 40% in the ri t month following the sale, and 10% in the second month following the sale It pays 30% or direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. It pays all other Items above in the month incurred, except depreciation expenses Other data are as follows: 1. Credit sales: November 2012, $203,400; December 2012, $2B1,000 2. Purchases of dirert materials: December 2012, sBB.5110 3. ather recipts: January-callection af December 31, 2012, notes receivable $5,940; February-proceeds from sale of securities $5,570 4. Other disbursements: February-payment of $21,900 for land The company expects its cash balance on January 1, 2013, to be $50,000. It wants to maintain a minimum cash balance ot $40,000 Your answer is correct. Prepare schedules for (1) the excected collections from customers Month January February November 20310 112400 28100 anuary 174950 139960 February 202450 3D7690 (2) the expected payments for direct materials purchases. Month January February 61957 January 35910 83790 32670 116460 97867

Prepare a cash budget for Jan/Feb using columns for each month

Answer 1

Prepare cash budget for January and February using columns for each month
LORCH COMPANY Cash Budget For the Two Months Ending February 28, 2013
	January	February	Total
Beginning cash balance	50,000	46,153	50,000
Add: Receipts
Collections from customers (Sch 1)	307,690	370510	678,200
Notes Receivable	5,940		5,940
Sale of securities		5570	5,570
Total Receipts	313,630	376,080	689,710
Total available cash	363,630	422,233	739,710
Less: Disbursements
Direct materials (Sch 2)	97,867	116460	214,327
Direct labor	84,970	111510	196,480
Manufacturing overhead	59,740	74850	134,590
Selling and administrative expense	74,900	79140	154,040
Payment for land	-	21900	21,900
Total disbursements	317,477	403,860	721,337
Excess (deficiency) of available cash over cash disbursements	46,153	18,373	18,373
Financing			-
Borrowings	-	21,627	21,627
Repayments	-		-
Ending cash balance	46,153	40,000	40,000
*Selling and administrative expenses less $1,000 depreciation.