Colter Company prepares monthly cash budgets. Relevant data from
operating budgets for 2020 are as follows.
|Sales||$ 432,000||$ 480,000|
|Direct materials purchases||144,000||150,000|
|Selling and administrative expenses||94,800||102,000|
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 $ 1,200 of depreciation per month.
|1.||Credit sales: November 2019, $ 300,000; December 2019, $ 384,000.|
|2.||Purchases of direct materials: December 2019, $ 120,000.|
|3.||Other receipts: January—Collection of December 31, 2019, notes receivable $ 18,000;|
|February—Proceeds from sale of securities $ 7,200.|
|4.||Other disbursements: February—Payment of $ 7,200 cash dividend.|
The company’s cash balance on January 1, 2020, is expected to be $ 72,000. The company wants to maintain a minimum cash balance of $ 60,000.
Prepare schedules for (1) expected collections from customers
and (2) expected payments for direct materials purchases for
January and February.
Expected Collections from Customers
Expected collection from customers :
|November||300000*20% = 60000|
|December||384000*30% = 115200||76800|
|January||432000*50% = 216000||432000*30% = 129600|
|February||480000*50% = 240000|
Expected payment for direct material purchase :
|December||120000*40% = 48000|
|January||144000*60% = 86400||144000*40% = 57600|
|February||150000*60% = 90000|
|Total cash payment||134400||147600|
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