Question

The controller of Harrington Company estimates sales and production for the first four months of 2016 as follows:

		January		February		March		April
Sales		$30,200		$42,900		$54,800		$27,800
Production in units		1,030		1,550		2,170		2,590

Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 4 kg of direct material to produce a finished unit, and direct materials cost $5 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 60% the following month. Ending direct materials inventory for each month is 40% of the next month’s production needs.

January’s beginning materials inventory is 1,648 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.

Answer the following questions:

Sales are 40% cash and 60% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 40% of credit sales are collected. It takes 4 kg of direct material to produce a finished unit, and direct materials cost $5 per kg. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 60% the following month. Ending direct materials inventory for each month is 40% of the next month’s production needs.

January’s beginning materials inventory is 1,648 kg. Suppose that both accounts receivable and accounts payable are zero at the beginning of January.

Answer the following questions:

(g)

What is the cash balance for the period January–March? (Round answer to 0 decimal places, e.g. 125.)

Cash balance

$

This is all that was provided.

Answer 1

Particulars	January	February	March	Quarter Total
Cash sales	12080	17160	21920
Credit sales:
60%	10872	15444	19728
40%	-	7248	10296
Total cash collections (A)	29952	39852	51944	121748
Purchases: (WN1)
40%	9904	14384	18704
60%		14856	21576
Total cash payments (B)	9904	29240	40280	79424
Cash balance	20048	10612	11664	42324

WN1:

Particulars	Jan	feb	March
Production units	1030	1550	2170
Raw material required(×4)	4120	6200	8680
Add: closing units	2480	3472	4144
Less: Opening units	1648	2480	3472
Raw material to be purchased	4952	7192	9352
Raw material cost (×5)	24760	35960	46760