Preparing a Cash BudgetThe Sable Sisters, manufacturers of fine apparels, prepares monthly cash budgets to aid them in runningtheir business. Relevant data from operating budgets for the upcoming budget period are:SalesDirect material purchasesDirect labor1.2.3.4.5.Manufacturing overheadSelling and administrative expensesJanuary$365,000115,10091,15071,66082,000FebruaryAll sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first monthfollowing the month of sale, and 20% in the second month following the month of sale. Sixty percent (60%)of the direct materials purchases are paid in cash in the month of purchase, and the remaining balance ispaid in the following month. All other items above are paid in the month incurred except for depreciation.The selling & administrative expenses include $1,200 of depreciation per month.Other information:Sales for November of the prior year total $269,000; December $330,230Purchases for December of the prior year total $102,800.In January, the company expects to sell a piece of equipment for its salvage value of $16,900.In February, the company expects to sell some of its long-term investments for $6,250.In February, the company expects to pay a $4,890 cash dividend.$425,800132,900105,60073,85089,680Requirements:1.) Prepare the supporting cash budget schedules:a.) Cash Collections ScheduleThe company expects to start January with cash of $63,820 and wants to always maintain a minimum cashbalance of $50,000. In any month where the cash balance falls below $50,000, the company will take outthe difference from their line of credit with their local bank, Tom Nook AC Bank. Tom Nook charges 35%interest on all loaned amounts. The Sable Sisters will repay any borrowed funds in the earliest period inwhich there is a sufficient cash balance.b.) Cash Payments Schedule2.) Prepare a cash budget with columns for January and February.

Budgeting - Budgeting is the process of estimating future operations based on past performance. %…

Preparing a Cash Budget The Sable Sisters, manufacturers of fine apparels, prepares monthly cash budgets to aid them in running their business. Relevant data from operating budgets for the upcoming budget period are: Sales Direct material purchases Direct labor Manufacturing overhead Selling and administrative expenses January $365,000 115,100 91,150 71,660 82,000 February $425,800 132,900 105,600 73,850 89,680 All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the month of sale, and 20% in the second month following the month of sale. Sixty percent (60%) of the direct materials purchases are paid in cash in the month of purchase, and the remaining balance is paid in the following month. All other items above are paid in the month incurred except for depreciation. The selling & administrative expenses include $1,200 of depreciation per month. Other information: 1. Sales for November of the prior year total $269,000; December $330,230 2. Purchases for December of the prior year total $102,800. 3. 4. 5. In January, the company expects to sell a piece of equipment for its salvage value of $16,900. In February, the company expects to sell some of its long-term investments for $6,250. In February, the company expects to pay a $4,890 cash dividend. Requirements: 1.) Prepare the supporting cash budget schedules: a.) Cash Collections Schedule The company expects to start January with cash of $63,820 and wants to always maintain a minimum cash balance of $50,000. In any month where the cash balance falls below $50,000, the company will take out the difference from their line of credit with their local bank, Tom Nook AC Bank. Tom Nook charges 35% interest on all loaned amounts. The Sable Sisters will repay any borrowed funds in the earliest period in which there is a sufficient cash balance. b.) Cash Payments Schedule 2.) Prepare a cash budget with columns for January and February.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q