The projected sales for the Leeds Company is given below. The company has determined that allsales are on credit and they do not have any cash sales. For the credit sales, experience tellsLeeds they will collect 60% of sales in the quarter of the sale and the remaining 40% is collectedthe quarter after the sale. The sales in the last quarter of the previous year is $200,000.Qtr 1Qtr 2Qtr 3Qtr 4Budgeted Sales$600,000$1,600,000$800,000$1,000,000Leeds need cash to pay for purchases, wages, rent, interest, income taxes, cash dividends, andmost other expenses. Leeds Company is a manufacturing company, the material purchasesrequirement for the next four quarters is given in the following table. Leed Company makes allmaterial purchases on credit. Leed Company will pay for material purchases 80% in the quarterof purchase and 20% in the quarter after the purchase. The materials purchased in the lastquarter of previous years is $400,000.Budgeted Material Purchases$250,000$295,000$217,500$217,500Leed Company also needs cash payments for direct labor (all direct labor paid in the quarter itwas incurred), cash payments for manufacturing overhead and cash payments for selling andadministrative expenses which are listed in the following table. Further, the company assumesthat $40,000 of dividends will be paid in the second quarter and $80,000 in the third quarter.Also, Leed plans to expand operations into a new building that will cost $650,000 in Quarter 4.Leed plans to pay cash for the new building. On January 1, Leed Company’s cash balance was$130,000. Leeds Company like to keep at a minimum of $10,000 as their ending cash balanceeach quarter. Prepare a cash budget for the next four quarters for the company.Leeds CompanySchedule of Cash PaymentsQtr 1Qtr 2Qtr 3Qtr 4Total Cash Pmts for Material Purchases280,000286,000233,000217,500Budgeted direct labor dollars126,000192,000132,000156,000Cash payments for mfg overhead80,75089,00081,50080,750Cash payments for selling and admin110,000160,000120,000130,000Cash payments for Income Taxes100,000*57,500270,000100,000

Solution: Cash Budget for four Quarters Particulars Quarters…

The projected sales for the Leeds Company is given below. The company has determined that ll sales are on credit and they do not have any cash sales. For the credit sales, experience tells Leeds they will collect 60% of sales in the quarter of the sale and the remaining 40% is collected

The projected sales for the Leeds Company is given below. The company has determined that ll sales are on credit and they do not have any cash sales. For the credit sales, experience tells Leeds they will collect 60% of sales in the quarter of the sale and the remaining 40% is collected

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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