Reference no: EM132762901

Question - The January 1, 2019 cash balance is expected to be $38,000.

The company wishes to maintain a balance of at least $15,000.

Sales are collected 60% in the quarter sold and 40% are collected in the following quarter.

A/R of $60,000 at December 31, 2018 are expected to be collected in full in the first quarter of 2019.

Sales: Q1= $180,000 Q2= $210,000 Q3= $240,000 Q4= $170,000

Short-term investments are expected to be sold for $2,000 cash in the first quarter.

Direct materials are paid 50% in the quarter purchased and 50% paid for in the following quarter.

A/P of $10,600 at December 31, 2018 are expected to be paid in full in the first quarter of 2019

Direct materials purchase: Q1= $25,200 Q2= $29,200 Q3= $33,200 Q4= $37,200

Direct labour is paid in quarter incurred:

Q1= $62,000 Q2= $72,000 Q3= $82,000 Q4= $92,000

Manufacturing overhead except depreciation:

Q1= $53,300 Q2= $56,300 Q3= $59,300 Q4= $62,300

and selling and administrative expenses are paid in the quarter incurred:

Q1= $41,000 Q2= $43,000 Q3= $45,000 Q4= $47,000

Management plans to purchase a truck in the second quarter for $10,000

The company makes equal quarterly payments of the estimated annual income taxes ($12,000)

Loans are repaid in the earliest quarter in which there is sufficient cash (that is when the cash on hand exceeds the $15,000 minimum required balance). Since there is an excess of available cash, the borrowing plus $100 interest is repaid in the third quarter.

Required -

1. Based on all these assumptions, how can prepare cash budget by quarters for 2019.

2. In preparing the cash budget, how to prepare schedules for collections from customers and cash payments for direct materials.