Question

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

Answer 1

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