Question

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: anuary February $360,000 120,000 90,000 70,000 79,000 $400,000 125,000 100,000 75,000 85,000 Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses 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 $1,000 of depreciation per month Other data: 1. 2. 3. Credit sales: November 2016, $250,000; December 2016, $320,000 Purchases of direct materials: December 2016, $100,000 Other receipts: January-Collection of December 31, 2016, notes receivable $15,000; February-Proceeds from sale of securities $6,000 4. Other disbursements: February-Payment of $6,000 cash dividend The company's cash balance on January 1, 2017, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000

Answer 1

Answer

• All working forms part of the answer
• Cash collections and payment for purchases have already been done by you correctly. The rest part is attempted here.
• Cash Budget as asked.

	January ($)	February ($)
Opening Cash Balance	60000	51000
Add: Cash receipts
Collections from customer [based on your answer]	326000	372000
Notes Receivable	15000
Sale of securities		6000
Total cash receipts	341000	378000
Cash available	401000	429000
Less: Cash Disbursement
Payments for direct materials [based on your answer]	112000	123000
Direct labor	90000	100000
Manufacturing Overhead	70000	75000
Selling & Administrative expenses, excl depreciation	78000	84000
Cash dividend		6000
Total cash disbursement	350000	388000
Excess (Shortfall) of cash available over disbursement	51000	41000
Financing:
Add: Borrowing	0	9000
Less: Repayments	0
Closing cash balance	$51000	$50000