QUESTION 42 SATTERFIELD-MICKEY COMPANY: Satterfield-Mickey Company has been prep
ID: 2568113 • Letter: Q
Question
QUESTION 42 SATTERFIELD-MICKEY COMPANY: Satterfield-Mickey Company has been preparing monthly cash budgets since b job assignment is to prepare a cash budget for April and for May 2018 y has been preparing monthly cash budgets since business activity slowed down a month or so ago Your The following information has been provided April May Revenue from sales Direct material purchases Direct labor Manufacturing overhead Selling and administrative expenses $700,000 233,000 175.000 136,100 153,610 $780,000 243,750 195,000 140,625 165,750 Relevant information a All sales are on account b Collections are expected to be 50% in the month of the sale, 35% in the first month following the sale, and 15% in the second month following the sale month following the purchase Alother tems listed above are paid in the month incurred except for selling and administrative expenses that includes $5,000 materials purchases are paid in cash in the month of purchase, and the balance due is paid in the depreciation per month ve and submitExplanation / Answer
Cash budget
For months ending April and May 2018 of Satterfield Mickey company
Particulars
April
May
Receipts
Opening balance
$1,50,000
$5,01,740
Cash sales
7,00,000
7,80,000
Collection from Accounts receivables
(1a) 2,80,000
(1b) 93,000
Other receipts
collection of March 2018 notes receivables
45,000
-------
Proceeds from sale of securities
-------
15,000
Total receipts
$11,75,000
$13,89,740
Payments
Direct material purchase
(3a) $2,13,550
(3b) $238375
Direct labour
175,000
195,000
Manufacturing overhead
136,100
140,625
Selling & Distribution
(4a) 148,610
(4b) 160,750
other payments -
Payment of dividends
-----
12,000
total payments
$6,73,260
$746750
Closing balance
$5,01,740
$6,42,990
Working note (1):
Calculation of amount received from credit sales or from accounts receivables –
(1a)For April
: Feb. Collections = 15% of 480,000 = $72,000
March collections = 620,000X 35% = 217,000
Total = $280,000
(1b)For May:
: March Collections = 15% of 620,000 = $93,000
Working note (3):
Calculation of amount of purchase of direct materials:
(March – 194,100; April – 233,000; May – 243,750;)
(3a) April: March purchases: 194100X50% = 97,050
April purchases= 233,000X50% = 116,500
Total $213,550
(3b) May: April purchases = 233,000X50% = 116,500
May purchases = 243,750 X50% = 121875
Total 238375
Working note (4):
Calculation of Selling and distribution:
(4a) April Selling and distribution: 153,610 – (Depreciation) 5,000 = $148,610
(4b) May Selling and distribution: 165,750 – (Depreciation) 5,000 = $160,750
Note: As per company policy if cash balance should be minimum $130,000. If the balance is below $130,000, the company has to obtain credit from bank. But, here the balance is in April and May, in both months above over $130,000. So, no need of taking any credit from bank.
Particulars
April
May
Receipts
Opening balance
$1,50,000
$5,01,740
Cash sales
7,00,000
7,80,000
Collection from Accounts receivables
(1a) 2,80,000
(1b) 93,000
Other receipts
collection of March 2018 notes receivables
45,000
-------
Proceeds from sale of securities
-------
15,000
Total receipts
$11,75,000
$13,89,740
Payments
Direct material purchase
(3a) $2,13,550
(3b) $238375
Direct labour
175,000
195,000
Manufacturing overhead
136,100
140,625
Selling & Distribution
(4a) 148,610
(4b) 160,750
other payments -
Payment of dividends
-----
12,000
total payments
$6,73,260
$746750
Closing balance
$5,01,740
$6,42,990
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