Question

Problem 23-4A

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

		January		February
Sales		$375,840		$417,600
Direct materials purchases		125,280		130,500
Direct labor		93,960		104,400
Manufacturing overhead		73,080		78,300
Selling and administrative expenses		82,476		88,740

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 $1,044 of depreciation per month.

Other data:

1.		Credit sales: November 2016, $261,000; December 2016, $334,080.
2.		Purchases of direct materials: December 2016, $104,400.
3.		Other receipts: January—Collection of December 31, 2016, notes receivable $15,660;
		February—Proceeds from sale of securities $6,264.
4.		Other disbursements: February—Payment of $6,264 cash dividend

The company’s cash balance on January 1, 2017, is expected to be $62,640. The company wants to maintain a minimum cash balance of $52,200

Prepare a cash budget for January and February in columnar form. (Do not leave any answer field blank. Enter 0 for amounts.)
- need excess (deficeinecy) of available cash over cash disbrustments

Need Add: borrowing

need - add: repayments and ending cash balance

Answer 1

Solution

Colter Company

Cash Budget –

Colter Company
Cash Budget
for the two months - January and February
	January	February
Beginning Cash balance	$62,640	$53,244
Add: Cash receipts
collections from customers	$340,344	$388,368
Notes Receivable	$15,660
Sale of securities		$6,264
Total receipts	$356,004	$394,632
Available cash	$418,644	$447,876
Less: Disbursements:
Direct material purchases	$116,928	$128,412
Direct labor	$93,960	104,400
Manufacturing overhead	$73,080	$78,300
selling and administrative expenses	$81,432	$87,696
Cash dividend		$6,264
Total disbursements	$365,400	$405,072
Excess/(deficiency) of available cash over disbursements	$53,244	$42,804
minimum balance	$52,200	$52,200
Financing -
Borrowings		$9,396
Repayments
Ending cash balance	$53,244	$52,200

Workings –

Collections from customers -
	January	February
November sales collections	$52,200
December sales collections	$100,224	$66,816
January sales	$187,920	$112,752
February sales collections		$208,800
Total collections from customers	$340,344	$388,368
Payments for direct materials -
	January	February
December purchases	$41,760
January Purchases	$75,168	$50,112
February Purchases		$78,300
Total payments for purchases	$116,928	$128,412

Notes:

The selling and administrative expenses item is shown excluding the non-cash expense - monthly depreciation of $1,044.