P24-4B Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are: Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January $350,000 110,000 85,000 60,000 75,000 February $400,000 120,000 115,000 75,000 80,000 All sales are on account. Collections are expected to be 60% in the month of sale, 25% in the first month following the sale, and 15% in the second month following the sale. Thirty percent (30%) 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. Depreciation has been excluded from manufacturing over- head and selling and administrative expenses. Other data: 1. Credit sales: November 2016, $200,000; December 2016, $290,000. 2. Purchases of direct materials: December 2016, $90,000. 3. Other receipts: January-collection of December 31, 2016, interest receivable $3,000; February-proceeds from sale of securities $5,000. 4. Other disbursements: February-payment of $20,000 for land. The company's cash balance on January 1, 2017, is expected to be $50,000. The com- pany wants to maintain a minimum cash balance of $40,000. Instructions (a) Prepare schedules for (1) expected collections from customers and (2) expected pay- ments for direct materials purchases. (b) Prepare a cash budget for January and February in columnar form.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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P24-4B Derby Company prepares monthly cash budgets. Relevant data from
operating budgets for 2017 are:
Sales
Direct materials purchases
Direct labor
Manufacturing overhead
Selling and administrative expenses
January February
$350,000
$400,000
110,000
120,000
115,000
75,000
80,000
85,000
60,000
75,000
All sales are on account. Collections are expected to be 60% in the month of sale, 25% in
the first month following the sale, and 15% in the second month following the sale. Thirty
percent (30%) 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. Depreciation has been excluded from manufacturing over-
head and selling and administrative expenses.
Other data:
1. Credit sales: November 2016, $200,000; December 2016, $290,000.
2. Purchases of direct materials: December 2016, $90,000.
3. Other receipts: January-collection of December 31, 2016, interest receivable $3,000;
February-proceeds from sale of securities $5,000.
4. Other disbursements: February-payment of $20,000 for land.
The company's cash balance on January 1, 2017, is expected to be $50,000. The com-
pany wants to maintain a minimum cash balance of $40,000.
Instructions
(a) Prepare schedules for (1) expected collections from customers and (2) expected pay-
ments for direct materials purchases.
(b) Prepare a cash budget for January and February in columnar form.
Transcribed Image Text:P24-4B Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are: Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January February $350,000 $400,000 110,000 120,000 115,000 75,000 80,000 85,000 60,000 75,000 All sales are on account. Collections are expected to be 60% in the month of sale, 25% in the first month following the sale, and 15% in the second month following the sale. Thirty percent (30%) 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. Depreciation has been excluded from manufacturing over- head and selling and administrative expenses. Other data: 1. Credit sales: November 2016, $200,000; December 2016, $290,000. 2. Purchases of direct materials: December 2016, $90,000. 3. Other receipts: January-collection of December 31, 2016, interest receivable $3,000; February-proceeds from sale of securities $5,000. 4. Other disbursements: February-payment of $20,000 for land. The company's cash balance on January 1, 2017, is expected to be $50,000. The com- pany wants to maintain a minimum cash balance of $40,000. Instructions (a) Prepare schedules for (1) expected collections from customers and (2) expected pay- ments for direct materials purchases. (b) Prepare a cash budget for January and February in columnar form.
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