Question

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

		January		February
Sales		$ 426,960		$ 474,400
Direct materials purchases		142,320		148,250
Direct labor		106,740		118,600
Manufacturing overhead		83,020		88,950
Selling and administrative expenses		93,694		100,810

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 $ 1,186 of depreciation per month.

Other data:

1.		Credit sales: November 2016, $ 296,500; December 2016, $ 379,520.
2.		Purchases of direct materials: December 2016, $ 118,600.
3.		Other receipts: January—Collection of December 31, 2016, notes receivable $ 17,790;
		February—Proceeds from sale of securities $ 7,116.
4.		Other disbursements: February—Payment of $ 7,116 cash dividend.

The company’s cash balance on January 1, 2017, is expected to be $ 71,160. The company wants to maintain a minimum cash balance of $ 59,300.

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

Expected Collections from Customers
		January		February
November		$		$
December
January
February
Total collections		$		$

Expected Payments for Direct Materials
		January		February
December		$		$
January
February
Total payments		$		$

Prepare a cash budget for January and February in columnar form. (Do not leave any answer field blank. Enter 0 for amounts.)

COLTER COMPANY Cash Budget   For the Two Months Ending February 28, 2017February 28, 2017For the Quarter Ending February 28, 2017
		January		February
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend		$		$
AddLess:   Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
AddLess:   Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
AddLess:   Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
AddLess:   Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend
Beginning Cash BalanceBorrowingsCollections from CustomersDirect LaborDirect MaterialsDisbursementsEnding Cash BalanceExcess (Deficiency) of Available Cash Over Cash DisbursementsFinancingManufacturing OverheadNotes ReceivableReceiptsRepaymentsSale of SecuritiesSelling and Administrative ExpensesTotal Available CashTotal DisbursementsTotal ReceiptsCash Dividend		$		$

Answer 1

Expected Collections from Customers
	January	February
November	59300	0
December	113856	75904
January	213480	128088
February	0	237200
Total collections	386636	441192
Expected Payments for Direct Materials
	January	February
December	47440	0
January	85392	56928
February	0	88950
Total payments	132832	145878
CASH BUDGET
	January	February
Beginning cash balance	71160	60486
Receipts:
Collections from customers	386636	441192
Collection of notes receivable	17790
Sale of securities		7116
Total receipts	404426	448308
Total cash available	475586	508794
Cash disbursements:
Payments for direct materials	132832	145878
Direct labor	106740	118600
Manufacturing overhead	83020	88950
Selling and administrative expenses	92508	99624
Dividends	0	7116
Total cash disbursements	415100	460168
Excess/(Deficiency)	60486	48626
Financing:
Borrowing	0	10674
Payment of interest	0	0
Repayment of principal	0	0
Total financing	0	10674
Ending cash balance	60486	59300