Colter Company prepares monthly cash budgets. Relevant data from operating budge

Question

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are: 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 $1,130 of depreciation per month. The company's cash balance on January 1, 2014, is expected to be $67,800. The company wants to maintain a minimum cash balance of $56,500. Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Explanation / Answer

Part A)

1) The schedule of expected collections is given below:

Notes:

1) 20% of November's sales will be collected in January.

2) 30% of December's sales will be collected in January and 20% in February.

___________

2) The schedule of expected payments is given below:

Notes:

1) 40% of December's direct materials purchases will be paid for in January.

Expected Collection from Customers January February November 58,760 (293,800*20%) December 108,480 (361,600*30%) 72,320 (361,600*20%) January 197,750 (395,500*50%) 118,650 (395,500*30%) February 226,000 (452,000*50%) Total Collections $364,990 $416,970

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