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Schedule of expected cash collections from customers and  Schedule for expected cash payments for materials purchases

Schedule of expected cash collections from customers and  Schedule for expected cash payments for materials purchases

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare  Schedule of expected cash collections from customers and  Schedule for expected cash payments for materials purchases
 
 And also prepare  A Cash Budget.
The facts and figures relating to Irrigation Corporation are as follows. Irrgation Corporation produces plastic garden sprinklers. The company is preparing its budget for 2021. The first step is to plan for the first quarter of the coming year. Irrigation has collected the following information from the managers. 1. Sales: Sales for December 2020 102,100 units Expected sales for January 2021 113,000 units Expected sales for February 2021 112,500 units Expected sales for March 2021 Expected sales for April 2021 Expected sales for May 2021 Selling price per unit 116,000 units 125,000 units 137,500 units $4 Irrigation likes to keep 10% of the next month's unit sales in ending inventory. 1 All sales are on credit. 95% of the accounts receivable are collected in the month of sale and 5% of the accounts receivable are collected in the month after sale. Accounts receivable on December 31, 2020, totaled $183,780. 2. Direct Materials: Two (3) pounds of direct materials is needed to produce one unit. Irrigation likes to keep 5% of the materials needed for the next month's production in its ending inventory. Raw materials on hand on December 31, 2020, totaled 12,295 pounds. Payment for materials is made within 10 days. 70% is paid in the month of purchase, and 30% is paid after the month of purchase. Accounts payable on December 31, 2020, totaled $130,595. NB: You are to determine the price per pound logically from the information provided here. 3. Direct Labor Labor requires 10 minutes per unit for completion and is paid at a rate of $15 per hour. Manufacturing Overhead 4. Indirect materials $0.35 per direct labor hour Indirect labor $0.55 per direct labor hour Utilities $0.50 per direct labor hour Maintenance $0.30 per direct labor hour Factory supervisor's salary Factory Depreciation $40,200 per month $18,600 per month $ 2,765 per month Property taxes Insurance $1,020 per month Repairs $1,030 per month 5. Selling and Administrative expenses Salaries $70,200 per month Advertising $10,500 per month $1,040 per month $ 2,050 per month $ 3,050 per month $0.20 per unit of sales Insurance Office Depreciation Miscellaneous fixed costs Commission Further information The cash balance on December 31, 2020, totaled $700,500. Management has decided it would like to maintain a monthly cash balance of at least $300,000 beginning on January 31, 2021. The company receives dividends @ $0.50 per share for 150,000 shares each month. The company has an open line of credit with National Bank. The terms of the agreement require borrowing to be in the increments of $10,000, and the interest rate is 6% pa. Irrigation borrows on the first day of the month and repays on the last day of the month if possible. A $300,000 equipment purchase is planned for February 2021.
Transcribed Image Text:The facts and figures relating to Irrigation Corporation are as follows. Irrgation Corporation produces plastic garden sprinklers. The company is preparing its budget for 2021. The first step is to plan for the first quarter of the coming year. Irrigation has collected the following information from the managers. 1. Sales: Sales for December 2020 102,100 units Expected sales for January 2021 113,000 units Expected sales for February 2021 112,500 units Expected sales for March 2021 Expected sales for April 2021 Expected sales for May 2021 Selling price per unit 116,000 units 125,000 units 137,500 units $4 Irrigation likes to keep 10% of the next month's unit sales in ending inventory. 1 All sales are on credit. 95% of the accounts receivable are collected in the month of sale and 5% of the accounts receivable are collected in the month after sale. Accounts receivable on December 31, 2020, totaled $183,780. 2. Direct Materials: Two (3) pounds of direct materials is needed to produce one unit. Irrigation likes to keep 5% of the materials needed for the next month's production in its ending inventory. Raw materials on hand on December 31, 2020, totaled 12,295 pounds. Payment for materials is made within 10 days. 70% is paid in the month of purchase, and 30% is paid after the month of purchase. Accounts payable on December 31, 2020, totaled $130,595. NB: You are to determine the price per pound logically from the information provided here. 3. Direct Labor Labor requires 10 minutes per unit for completion and is paid at a rate of $15 per hour. Manufacturing Overhead 4. Indirect materials $0.35 per direct labor hour Indirect labor $0.55 per direct labor hour Utilities $0.50 per direct labor hour Maintenance $0.30 per direct labor hour Factory supervisor's salary Factory Depreciation $40,200 per month $18,600 per month $ 2,765 per month Property taxes Insurance $1,020 per month Repairs $1,030 per month 5. Selling and Administrative expenses Salaries $70,200 per month Advertising $10,500 per month $1,040 per month $ 2,050 per month $ 3,050 per month $0.20 per unit of sales Insurance Office Depreciation Miscellaneous fixed costs Commission Further information The cash balance on December 31, 2020, totaled $700,500. Management has decided it would like to maintain a monthly cash balance of at least $300,000 beginning on January 31, 2021. The company receives dividends @ $0.50 per share for 150,000 shares each month. The company has an open line of credit with National Bank. The terms of the agreement require borrowing to be in the increments of $10,000, and the interest rate is 6% pa. Irrigation borrows on the first day of the month and repays on the last day of the month if possible. A $300,000 equipment purchase is planned for February 2021.
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