Question

Problem 4-21 Schedule of cash payments [LO4-2] The Denver Corporation has forecast the following sales for the first seven months of the year: January $ 30,000 May $ 30,000 February 32,000 June 36,000 March 34,000 July 38,000 April 40,000 Monthly material purchases are set equal to 40 percent of forecast sales for the next month. Of the total material costs, 50 percent are paid in the month of purchase and 50 percent in the following month. Labor costs will run $6,000 per month, and fixed overhead is $12,000 per month. Interest payments on the debt will be $5,000 for both March and June. Finally, the Denver salesforce will receive a 3.00 percent commission on total sales for the first six months of the year, to be paid on June 30. Prepare a monthly summary of cash payments for the six-month period from January through June. (Note: Compute prior December purchases to help get total material payments for January.)

Answer 1

	Denver Corporation
	Cash Payment for Raw Material
Months	Dec	Jan	Feb	Mar	April	May	June	July
Sales		$          30,000.00	$             32,000.00	$           34,000.00	$ 40,000.00	$ 30,000.00	$ 36,000.00	$ 38,000.00
Purchases 40% of sales	$         12,000.00	$          12,800.00	$             13,600.00	$           16,000.00	$ 12,000.00	$ 14,400.00	$ 15,200.00	$                 -
Cash Payment For previous month purchases(50%)		$            6,000.00	$               6,400.00	$             6,800.00	$    8,000.00	$    6,000.00	$    7,200.00	$    7,600.00
Cash payment For current month purchases(50%)		$            6,400.00	$               6,800.00	$             8,000.00	$    6,000.00	$    7,200.00	$    7,600.00	$                 -
Total Cash Payment		$          12,400.00	$             13,200.00	$           14,800.00	$ 14,000.00	$ 13,200.00	$ 14,800.00	$    7,600.00
	Cash Payment for 6 MONTHS
Months	Dec	Jan	Feb	Mar	April	May	June	July
Sales		$          30,000.00	$             32,000.00	$           34,000.00	$ 40,000.00	$ 30,000.00	$ 36,000.00	$ 38,000.00
Payment for Purchase		$          12,400.00	$             13,200.00	$           14,800.00	$ 14,000.00	$ 13,200.00	$ 14,800.00	$    7,600.00
Labor cost	$           6,000.00	$            6,000.00	$               6,000.00	$             6,000.00	$    6,000.00	$    6,000.00	$    6,000.00	$    6,000.00
Fixed Overhead	$         12,000.00	$          12,000.00	$             12,000.00	$           12,000.00	$ 12,000.00	$ 12,000.00	$ 12,000.00	$ 12,000.00
Interest Paid				$             5,000.00			$    5,000.00
Commission (3% of 6 months Sales)=($202000*3%)				$                          -			$    6,060.00
Total Cash Payment	$         18,000.00	$          30,400.00	$             31,200.00	$           37,800.00	$ 32,000.00	$ 31,200.00	$ 43,860.00	$ 25,600.00
Month	Sales
Jan	$         30,000.00
Feb	$         32,000.00
Mar	$         34,000.00
April	$         40,000.00
May	$         30,000.00
June	$         36,000.00
Total Sales	$     2,02,000.00
Commission(3% on $202000)	$           6,060.00