In: Accounting
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
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