Colter Company
prepares monthly cash budgets. Relevant data from operating budgets for 2014
are:
January February
Sales $360,000 $400,000
Direct
Material Purchase 120,000 125,000
Direct
labor 90,000 100,000
Manufacturing
Overhead 70,000 75,000
Selling
& Administrative Expenses 79,000 85,000
.:.
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 $1,000 of depreciation per month.
Other data:
1. Credit sales:
November 2013, $250,000; December 2013, $320,000.
2. Purchases of
direct materials: December 2013, $100,000.
3. Other receipts:
January—collection of December 31, 2013, notes receivable $15,000;
February—proceeds from sale of securities $6,000.
4. Other
disbursements: February—payment of $6,000 cash dividend. The company’s cash
balance on January 1, 2014, is expected to be $60,000. The company wants to
maintain a minimum cash balance of $50,000.
Instructions
(a) Prepare schedules
for
(1) Expected collections
from customers and
(2) Expected payments
for direct materials purchases for January and February.
(b) Prepare a cash
budget for January and February in columnar form.
(a) (1) Expected
Collections from Customers
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January
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February
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November ($250,000).................................................
December ($320,000).................................................
January ($360,000)....................................................
February ($400,000)...................................................
Total collections..............................................
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$ 50,000
96,000
180,000
.
$326,000
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$ 0
64,000
108,000
200,000
$372,000
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(2) Expected
Payments for Direct Materials
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January
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February
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December ($100,000).................................................
January ($120,000)....................................................
February ($125,000)...................................................
Total payments................................................
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$ 40,000
72,000
.
$112,000
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$ 0
48,000
75,000
$123,000
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(b)
COLTER COMPANY
Cash Budget
For the Two Months Ending February 28, 2014
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January
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February
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Beginning cash balance....................................................
Add: Receipts
Collections
from customers............................
[See
Schedule (1)]
Notes
receivable...............................................
Sale
of securities..............................................
Total
receipts............................................
Total available cash.............................................................
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$ 60,000
326,000
15,000
341,000
401,000
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$ 51,000
372,000
6,000
378,000
429,000
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Less:
Disbursements
Direct
materials................................................
[See
Schedule 2]
Direct
labor.......................................................
Manufacturing
overhead...............................
Selling
and administrative
expenses*....................................................
Cash
dividend.................................................
Total
disbursements..............................
Excess (deficiency) of available cash
over cash disbursements...............................................
Financing
Add: Borrowings..............................................................
Less: Repayments...........................................................
Ending cash balance..........................................................
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112,000
90,000
70,000
78,000
350,000
51,000
0
0
$ 51,000
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123,000
100,000
75,000
84,000
6,000
388,000
41,000
9,000
0
$ 50,000
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*Selling and
administrative expenses less $1,000 depreciation.
