Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows. Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses Other data: 1. 2. 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. 3. January February $360,000 $400,000 125,000 100,000 75,000 85,000 4. 120,000 90,000 70,000 79,000 Credit sales: November 2021, $250,000; December 2021, $320,000. Purchases of direct materials: December 2021, $100,000. Other receipts: January-Collection of December 31, 2021, notes receivable $15,000; February-Proceeds from sale of securities $6,000. Other disbursements: February-Payment of $6,000 cash dividend. The company's cash balance on January 1, 2022, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows. Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses Other data: 1. 2. 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. 3. January February $360,000 $400,000 125,000 100,000 75,000 85,000 4. 120,000 90,000 70,000 79,000 Credit sales: November 2021, $250,000; December 2021, $320,000. Purchases of direct materials: December 2021, $100,000. Other receipts: January-Collection of December 31, 2021, notes receivable $15,000; February-Proceeds from sale of securities $6,000. Other disbursements: February-Payment of $6,000 cash dividend. The company's cash balance on January 1, 2022, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for
January and February.
November
December
January
February
December
Total collections $
January
COLTER COMPANY
Schedule of Expected Collections from Customers
February
LA
Total payments
LA
$
tA
January
COLTERCOMPANY
Schedule of Expected Payments for Direct Materials
$
January
$
LA
February
LA
February
Transcribed Image Text:Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows.
Sales
Direct materials purchases
Direct labor
Manufacturing overhead
Selling and administrative expenses
Other data:
1.
2.
3.
January
February
$360,000 $400,000
125,000
100,000
4.
120,000
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.
90,000
70,000
79,000
75,000
85,000
Credit sales: November 2021, $250,000; December 2021, $320,000.
Purchases of direct materials: December 2021, $100,000.
Other receipts: January-Collection of December 31, 2021, notes receivable $15,000;
February-Proceeds from sale of securities $6,000.
Other disbursements: February-Payment of $6,000 cash dividend.
The company's cash balance on January 1, 2022, is expected to be $60,000. The company wants to maintain a minimum cash balance
of $50,000.
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