January February Prepare schedules for (1) expected collections from customers a

Question

January

February

Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February. (3) Prepare a cash budget for January and February in columnar form.

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are:

January

February

Sales $402,500 $460,000 Direct materials purchases 126,500 149,500 Direct labor 103,500 115,000 Manufacturing overhead 80,500 86,250 Selling and administrative expenses 90,850 98,900
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 $1,150 of depreciation per month.

Other data:
1. Credit sales: November 2013, $299,000; December 2013, $368,000. 2. Purchases of direct materials: December 2013, $115,000. 3. Other receipts: January—Collection of December 31, 2013, notes receivable $17,250;                       February—Proceeds from sale of securities $6,900. 4. Other disbursements: February—Payment of $5,750 cash dividend.
The company’s cash balance on January 1, 2014, is expected to be $69,000. The company wants to maintain a minimum cash balance of $57,500.

Explanation / Answer

1) expected collections from customers

(2) expected payments for direct materials purchases for January and February.

(3) Prepare a cash budget for January and February in columnar form.

January February November sales on account: Collected in January                 59,800 December sales on account: Collected in December               110,400 Collected in January                    73,600 January sales on account: Collected in January               201,250 Collected in February                 120,750 February sales on account: Collected in February                 230,000 Expected Cash collection               371,450                 424,350

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