Question

In: Accounting

Use the schedule for cash receipts and the schedule for cash payments provided to complete a...

Use the schedule for cash receipts and the schedule for cash payments provided to complete a cash budget for M.K.H.M., Inc.

Additional Information: M.K.H.M.’s beginning cash balance is $5,000 and M.K.H.M. desires to maintain a minimum ending cash balance of $5,000. M.K.H.M. borrows cash as needed at the beginning of each month in increments of $1,000 and repays the amounts borrowed in increments of $1,000 at the beginning of months when excess cash is available. The interest rates on amounts borrowed is 12% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.

Schedule of Cash Receipts from Customers

January

February

March

Total

Total sales

$ 12,500

$ 13,240

$ 14,600

$ 40,340

January

February

March

Total

Cash Receipts from Customers:

Accounts Receivable balance, January 1

$          0

January—Cash sales (70%)

8,750

January—Credit sales (30%), 60% collected in Jan.

2,250

January—Credit sales (30%), 30% collected in Feb.

$   1,125

January – Credit sales (30%), 10% collected in Mar.

$     375

February—Cash sales (70%)

9,268

February—Credit sales (30%), 60% collected in Feb.

2,383

February—Credit sales (30%), 30% collected in Mar.

$   1,192

March—Cash sales (70%)

10,220

March—Credit sales (30%), 60% collected in Mar.

2,628

Total cash receipts from customers

$ 11,000

$ 12,776

$ 14,415

$ 38,191

Accounts Receivable balance, March 31:

February—Credit sales (30%), 10% collected in April

397

March—Credit sales (30%), 30% collected in April

1,314

March—Credit sales (30%), 10% collected in May

438

Total

$ 2,149

Schedule of Cash Payments

January

February

March

Total

Cash Payments

Direct Materials:

Accounts Payable balance, January 1

$         0

January—Direct materials purchases paid in Feb.

$   3,500

February—Direct materials purchases paid in Mar.

$    4,000

Total payments for direct materials

0

3,500

4,000

$   7,500

Direct Labor:

January—Direct labor paid in January

3,000

February—Direct labor paid in February

3,500

March—Direct labor paid in March

4,000

Total payments for direct labor

3,000

3,500

4,000

10,500

Manufacturing Overhead:

January—Utilities for plant paid in February

750

February—Utilities for plant paid in March

750

Year—Property taxes on plant prepaid on

     Jan. 2, $200/month × 12 months

2,400

Total payments for manufacturing overhead

2,400

750

750

3,900

Selling and Administrative Expenses:

January—Utilities for office paid in February

450

February—Utilities for office paid in March

450

Year—Property taxes on office prepaid on

     Jan. 2 ($150/month × 12 months)

1,800

January—Office salaries paid in January

4,000

February—Office salaries paid in February

4,000

March—Office salaries paid in March

4,000

Total payments for S&A expenses

5,800

4,450

4,450

14,700

Total cash payments

   $ 11,200

$ 12,200

$ 13,200

$ 36,600

March 31 liability balances:

Prepaid Property Taxes – $3,150

Plant: $2,400 × 9/12 = $1,800

Office: $1,800 × 9/12 = $1,350

Accounts Payable – $4,500

March direct materials purchases paid in April

Utilities Payable – $1,200

Plant: March utilities paid in April – $750

Office: March utilities paid in April – $450

M.K.H.M., Inc.

Cash Budget

For the Three Months Ended March 31

January

February

March

Total

Beginning cash balance

calculations

Cash receipts

Cash available

Cash payments:

    Purchases of direct materials

    Direct labor

    Manufacturing overhead

    Selling and administrative expenses

    Interest expense

Total cash payments

Ending cash balance before financing

Minimum cash balance desired

Projected cash excess (deficiency)

Financing:

    Borrowing

    Principal repayments

Total effects of financing

Ending cash balance

step by step calculations please

Solutions

Expert Solution

M.K.H.M., Inc.
Cash Budget
For the Three Months Ended March 31
January February March Total
Beginning cash balance                 -      5,800.00    5,316.00                -  
Cash receipts 11,000.00 12,776.00 14,415.00 38,191.00
Cash available 11,000.00 18,576.00 19,731.00 38,191.00
Cash payments:
    Purchases of direct materials                 -      3,500.00    4,000.00
    Direct labor     3,000.00    3,500.00    4,000.00
    Manufacturing overhead     2,400.00        750.00        750.00
    Selling and administrative expenses     5,800.00    4,450.00    4,450.00
    Interest expense          60.00          50.00
Total cash payments 11,200.00 12,260.00 13,250.00 36,710.00
Ending cash balance before financing       -200.00    6,316.00    6,481.00    1,481.00 Own Cash
Minimum cash balance desired     5,000.00    5,000.00    5,000.00
Projected cash excess (deficiency)    -5,200.00    1,316.00    1,481.00
Financing:
    Borrowing     6,000.00
    Principal repayments -1,000.00 -1,000.00
Total effects of financing     6,000.00 -1,000.00 -1,000.00    4,000.00 Net Borrowings
Ending cash balance     5,800.00    5,316.00    5,481.00    5,481.00

Interest payment for Feb = 6000*12%*1/12

Interest Payment for march = (6000-1000)*12%*1/12


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