Colter Company prepares monthly cash budgets. Relevant data from operating budge
ID: 2424601 • Letter: C
Question
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are:
January
February
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 $1,115 of depreciation per month.
Other data:
The company’s cash balance on January 1, 2014, is expected to be $66,900. The company wants to maintain a minimum cash balance of $55,750.
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
Expected Payments for Direct Materials
January
February
January
February
Sales $390,250 $446,000 Direct materials purchases 122,650 144,950 Direct labor 100,350 111,500 Manufacturing overhead 78,050 83,625 Selling and administrative expenses 88,085 95,890Explanation / Answer
Cash receipts Particulars Amount($) Jan Feb Credit Sales- Nov 289900 57980 Credit Sales- Dec 356800 107040 Credit Sales- Jan 390250 195125 Credit Sales- FEB 446000 223000 Collection of dec 13 16725 16725 Proceeds from sale of securities 6690 6690 Total Receipt of cash 376870 229690 Cash Payments Particulars Amount($) Jan Feb Direct materials purchases - Dec 356800 142720 Direct materials purchases - Jan 122650 73590 49060 Direct materials purchases - FEB 144950 86970 Direct labor 100350 111500 Manufacturing overhead 78050 83625 Selling and administrative expenses 86970 94775 Total Payment of cash 338960 425930 Cash receipts from Customers Particulars Amount($) Jan Feb Credit Sales- Nov 289900 57980 Credit Sales- Dec 356800 107040 Credit Sales- Jan 390250 195125 Credit Sales- FEB 446000 223000 Total Receipt of cash 360145 223000 Cash Payments for Direct Materials Particulars Amount($) Jan Feb Direct materials purchases - Dec 356800 142720 Direct materials purchases - Jan 122650 73590 49060 Direct materials purchases - FEB 144950 86970 Total Payment of cash 73590 136030