Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Prepare a cash budget for 2 months.
Collections from customers: January $85,000, February $150,000.
Payments for direct materials: January $50,000, February $75,000.
Direct labor: January $30,000, February $45,000.Wages are paid in the month they are incurred.
Manufacturing overhead: January $21,000, February $25,000.
These costs include depreciation of $1,500 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $12,000 in cash.
Danner Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000. Instructions Prepare a cash budget for January and February.
|Prepare cash budget for January and February|
|Collection from customers||85000.00||150000.00|
|Sale of marketable securities||12000.00|
|Total cash collections||97000.00||150000.00|
|Less: Cash payment|
|Payment for direct materials||50000.00||75000.00|
|Selling and administrative expenses||15000.00||20000.00|
|Total cash paid||114500.00||163500.00|
|Cash collection - cash paid||-17500.00||-13500.00|
|Beginning cash balance||45000.00||27500.00|
|Preliminary cash balance||27500.00||14000.00|
|Add: Loan borrowed||6000.00||(20000-14000)|
|Ending cash balance||27500.00||20000.00|
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