Question

Problem 10-39A (Part Level Submission)

The controller of Harrington Company estimates sales and production for the first four months of 2016 as follows:

		January		February		March		April
Sales		$33,000		$43,300		$53,200		$24,000
Production in units		1,050		1,560		2,180		2,620

Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 4 kg of direct material to produce a finished unit, and direct materials cost $5 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 60% the following month. Ending direct materials inventory for each month is 40% of the next month’s production needs.

January’s beginning materials inventory is 1,680 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.

Answer the following question:

-What is the cash balance for the period January–March? (Round answer to 0 decimal places, e.g. 125.)

Answer 1

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A. Schedule of expected cash collection			Collection
	Working	Credit Sale	Jan	Feb	Mar	Total
						$             -
Cash Sales	40%		$   13,200	$   17,320	$   21,280	$   51,800
Jan Sale	60% and 40%	$      19,800	$   11,880	$      7,920		$   19,800
Feb Sale	60% and 40%	$      25,980		$   15,588	$   10,392	$   25,980
Mar Sale	60%	$      31,920			$   19,152	$   19,152
Total Collection			$   25,080	$   40,828	$   50,824	$ 116,732
B. Schedule of Purchases
			Jan	Feb	Mar	Total	April
Production Units			1,050	1,560	2,180	4,790	2,620
Per unit of production need			4	4	4	4	4
Total Raw Material needed for production			4,200	6,240	8,720	19,160	10,480
Add: Desired Ending Inventory	40% of Next Month need		2,496	3,488	4,192	4,192
Total Needs			6,696	9,728	12,912	23,352
Less: Beginning Inventory			-1,680	-2,496	-3,488	-1,680
Total Purchases in Units			5,016	7,232	9,424	21,672
Cost per KG			$              5	$              5	$              5	$              5
Total Purchases in Dollars			$   25,080	$   36,160	$   47,120	$ 108,360
C. Schedule of expected cash disbursment			Payment
	Working	Purchases	Jan	Feb	Mar	Total
						$             -
Jan Pur	40% and 60%	$      25,080	$   10,032	$   15,048		$   25,080
Feb Pur	40% and 60%	$      36,160		$   14,464	$   21,696	$   36,160
Mar Pur	40%	$      47,120			$   18,848	$   18,848
						$             -
Total Cash Disbursment for purchases			$   10,032	$   29,512	$   40,544	$   80,088
C. Cash Budget
			Jan	Feb	Mar	Total
Beginning Cash Balance			$             -	$   15,048	$   26,364	$             -
Add: Budgeted Cash Collection			$   25,080	$   40,828	$   50,824	$ 116,732
Cash Available			$   25,080	$   55,876	$   77,188	$ 116,732
Less: Cash Payment made for
Purchases			$   10,032	$   29,512	$   40,544	$   80,088
Total Cash Payment			$   10,032	$   29,512	$   40,544	$   80,088
Ending Balance			$   15,048	$   26,364	$   36,644	$   36,644
Balance will be $ 36,644.