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P9-4A Colter Company prepares

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Colter Company prepares monthly cash budgets. Relevant data from operating
budgets for 2014 are:

   January  February 
Sales   360,000  400,000
Direct materials purchases   120,000  125,000
Direct labor   90,000  100,000
Manufacturing overhead   70,000  75,000
Selling and 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.

(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.

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