Question

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

		January		February
Sales		$363,600		$404,000
Direct materials purchases		121,200		126,250
Direct labor		90,900		101,000
Manufacturing overhead		70,700		75,750
Selling and administrative expenses		79,790		85,850

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 $1,010 of depreciation per month.

Other data:

1.		Credit sales: November 2016, $252,500; December 2016, $323,200.
2.		Purchases of direct materials: December 2016, $101,000.
3.		Other receipts: January—Collection of December 31, 2016, notes receivable $15,150;
		February—Proceeds from sale of securities $6,060.
4.		Other disbursements: February—Payment of $6,060 cash dividend.

The company’s cash balance on January 1, 2017, is expected to be $60,600. The company wants to maintain a minimum cash balance of $50,500.

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		$		$

Answer 1