Question

Exercise 9-14 (Video)

Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows.

Collections from customers: January $85,000, February $150,000.

Payments for direct materials: January $50,000, February $75,000.

Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred.

Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,500 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $12,000 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.

Prepare a cash budget for January and February.

DANNER COMPANY
Cash Budget

For the Quarter Ending February 28, 2020For the Two Months Ending February 28, 2020February 28, 2020

January

February

Direct MaterialsCollections from CustomersBeginning Cash BalanceFinancingRepaymentsDirect LaborManufacturing OverheadDisbursementsBorrowingsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsReceiptsSale of Marketable SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal Receipts

$

$

AddLess

:

Collections from CustomersDirect LaborTotal DisbursementsDirect MaterialsTotal Available CashSale of Marketable SecuritiesSelling and Administrative ExpensesDisbursementsTotal ReceiptsBorrowingsRepaymentsReceiptsManufacturing OverheadFinancingEnding Cash BalanceBeginning Cash BalanceExcess (Deficiency) of Available Cash Over Cash Disbursements

    Financing    Excess (Deficiency) of Available Cash Over Cash Disbursements    Total Disbursements    Selling and Administrative Expenses    Manufacturing Overhead    Receipts    Repayments    Disbursements    Ending Cash Balance    Sale of Marketable Securities    Total Available Cash    Total Receipts    Beginning Cash Balance    Borrowings    Collections from Customers    Direct Labor    Direct Materials    

    Total Available Cash    Direct Materials    Collections from Customers    Disbursements    Direct Labor    Sale of Marketable Securities    Ending Cash Balance    Excess (Deficiency) of Available Cash Over Cash Disbursements    Manufacturing Overhead    Financing    Total Disbursements    Receipts    Repayments    Total Receipts    Selling and Administrative Expenses    Beginning Cash Balance    Borrowings    

    Receipts    Repayments    Total Available Cash    Manufacturing Overhead    Beginning Cash Balance    Sale of Marketable Securities    Total Receipts    Financing    Borrowings    Total Disbursements    Selling and Administrative Expenses    Collections from Customers    Direct Labor    Direct Materials    Disbursements    Ending Cash Balance    Excess (Deficiency) of Available Cash Over Cash Disbursements    

Total ReceiptsManufacturing OverheadDirect LaborExcess (Deficiency) of Available Cash Over Cash DisbursementsReceiptsDisbursementsEnding Cash BalanceBeginning Cash BalanceRepaymentsBorrowingsFinancingSale of Marketable SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsDirect MaterialsCollections from Customers

AddLess

:

Sale of Marketable SecuritiesTotal ReceiptsDirect LaborSelling and Administrative ExpensesDirect MaterialsFinancingRepaymentsBeginning Cash BalanceDisbursementsTotal Available CashExcess (Deficiency) of Available Cash Over Cash DisbursementsCollections from CustomersManufacturing OverheadTotal DisbursementsEnding Cash BalanceBorrowingsReceipts

    Sale of Marketable Securities    Collections from Customers    Receipts    Total Receipts    Direct Labor    Selling and Administrative Expenses    Direct Materials    Beginning Cash Balance    Excess (Deficiency) of Available Cash Over Cash Disbursements    Financing    Total Available Cash    Manufacturing Overhead    Repayments    Disbursements    Ending Cash Balance    Total Disbursements    Borrowings    

    Collections from Customers    Selling and Administrative Expenses    Manufacturing Overhead    Total Receipts    Direct Materials    Direct Labor    Repayments    Total Available Cash    Receipts    Sale of Marketable Securities    Disbursements    Beginning Cash Balance    Borrowings    Ending Cash Balance    Total Disbursements    Excess (Deficiency) of Available Cash Over Cash Disbursements    Financing    

    Excess (Deficiency) of Available Cash Over Cash Disbursements    Sale of Marketable Securities    Total Available Cash    Disbursements    Direct Materials    Borrowings    Ending Cash Balance    Collections from Customers    Financing    Selling and Administrative Expenses    Direct Labor    Total Disbursements    Manufacturing Overhead    Total Receipts    Receipts    Beginning Cash Balance    Repayments    

    Financing    Disbursements    Manufacturing Overhead    Direct Labor    Borrowings    Receipts    Repayments    Total Receipts    Ending Cash Balance    Excess (Deficiency) of Available Cash Over Cash Disbursements    Selling and Administrative Expenses    Sale of Marketable Securities    Total Available Cash    Total Disbursements    Beginning Cash Balance    Direct Materials    Collections from Customers    

    Total Receipts    Selling and Administrative Expenses    Receipts    Total Disbursements    Disbursements    Manufacturing Overhead    Financing    Ending Cash Balance    Sale of Marketable Securities    Excess (Deficiency) of Available Cash Over Cash Disbursements    Beginning Cash Balance    Repayments    Borrowings    Total Available Cash    Collections from Customers    Direct Labor    Direct Materials    

Total Available CashManufacturing OverheadDisbursementsDirect LaborFinancingTotal DisbursementsReceiptsBeginning Cash BalanceTotal ReceiptsDirect MaterialsBorrowingsCollections from CustomersEnding Cash BalanceRepaymentsExcess (Deficiency) of Available Cash Over Cash DisbursementsSale of Marketable SecuritiesSelling and Administrative Expenses

Beginning Cash BalanceDirect LaborTotal ReceiptsEnding Cash BalanceBorrowingsDisbursementsCollections from CustomersDirect MaterialsReceiptsRepaymentsSale of Marketable SecuritiesExcess (Deficiency) of Available Cash Over Cash DisbursementsSelling and Administrative ExpensesFinancingManufacturing OverheadTotal Available CashTotal Disbursements

LessAdd

:

Direct LaborTotal ReceiptsExcess (Deficiency) of Available Cash Over Cash DisbursementsBeginning Cash BalanceDisbursementsDirect MaterialsSelling and Administrative ExpensesRepaymentsTotal Available CashReceiptsManufacturing OverheadTotal DisbursementsBorrowingsFinancingSale of Marketable SecuritiesCollections from CustomersEnding Cash Balance

AddLess

:

RepaymentsTotal DisbursementsTotal ReceiptsSelling and Administrative ExpensesBeginning Cash BalanceDirect LaborDirect MaterialsReceiptsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsManufacturing OverheadSale of Marketable SecuritiesFinancingTotal Available CashBorrowingsCollections from Customers

Collections from CustomersTotal Available CashDirect LaborEnding Cash BalanceDirect MaterialsDisbursementsExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingRepaymentsTotal ReceiptsManufacturing OverheadReceiptsSale of Marketable SecuritiesSelling and Administrative ExpensesTotal DisbursementsBeginning Cash BalanceBorrowings

$$

Answer 1

	January	February
Beginning cash balance	$       45,000	$     27,500
Receipts:
Collections from customers	$       85,000	$ 1,50,000
Sale of marketable securities	$       12,000	$              -
Total receipts	$       97,000	$ 1,50,000
Available cash	$    1,42,000	$ 1,77,500
Disbursements:
Payments for direct materials	$       50,000	$     75,000
Direct labor	$       30,000	$     45,000
Manufacturing overhead	$       19,500	$     23,500
Selling and administrative expenses	$       15,000	$     20,000
Total disbursements	$    1,14,500	$ 1,63,500
Excess/(Deficiency) of available cash over disbursement	$       27,500	$     14,000
Financing:
Borrowings	$                 -	$       6,000
Repayments	$                 -	$              -
Financing	$                 -	$       6,000
Ending cash balance	$       27,500	$     20,000