Question

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 2019, $250,000; December 2019, $320,000.
2.		Purchases of direct materials: December 2019, $100,000.
3.		Other receipts: January—Collection of December 31, 2019, 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, 2020, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.

(a)

Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Expected Collections from Customers
		January		February
November		$enter a dollar amount		$enter a dollar amount
December		enter a dollar amount		enter a dollar amount
January		enter a dollar amount		enter a dollar amount
February		enter a dollar amount		enter a dollar amount
Total collections		$enter a total amount		$enter a total amount

Expected Payments for Direct Materials
		January		February
December		$enter a dollar amount		$enter a dollar amount
January		enter a dollar amount		enter a dollar amount
February		enter a dollar amount		enter a dollar amount
Total payments		$enter a total amount		$enter a total amount

Answer 1

a)
Expected Collection from Customers:	January	February
November ($250,000*20/100)	$50,000
December ($320,000*30/100); ($320,000*20/100)	$96,000	$64,000
January	$15,000
February		$6,000
Total Collections	$161,000	$70,000
Expected Payments for Direct Materials:	January	February
December ($100,000*40/100)	$40,000
January	-	-
February		$6,000
Total Payments	$40,000	$6,000