January February (a) Expected Collections from Customers January February Expect

Question

January

February

(a)

Expected Collections from Customers

January

February

Expected Payments for Direct Materials

January

February

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows:

January

February

Sales $367,920 $408,800 Direct materials purchases 122,640 127,750 Direct labor 91,980 102,200 Manufacturing overhead 71,540 76,650 Selling and administrative expenses 80,738 86,870
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 $1,022 of depreciation per month.

Other data:
1. Credit sales: November 2016, $255,500; December 2016, $327,040. 2. Purchases of direct materials: December 2016, $102,200. 3. Other receipts: January—Collection of December 31, 2016, notes receivable $15,330;                       February—Proceeds from sale of securities $6,132. 4. Other disbursements: February—Payment of $6,132 cash dividend.
The company’s cash balance on January 1, 2017, is expected to be $61,320. The company wants to maintain a minimum cash balance of $51,100.

Explanation / Answer

Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Expected Payments for Direct Materials

January February November sales 51100 December sales 98112 65408 January sales 183960 110376 February sales 204400 Total expected cash collection 333172 380184

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