Reference no: EM132468118

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows.

                                                    January            February

Sales                                    $360,000        $400,000

Direct materials purchases          120,000         125,000

Direct labor                                90,000         100,000

Manufacturing overhead                 70,000         75,000

Selling and administrative expenses     79,000        85,000

Point 1: All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) 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 except for selling and administrative expenses that include $1,000 of depreciation per month.

Other data:

1. Credit sales: November 2016, $250,000; December 2016, $320,000.

2. Purchases of direct materials: December 2016, $100,000.

3. Other receipts: January-collection of December 31, 2016, notes receivable $15,000;

February-proceeds from sale of securities $6,000.

4. Other disbursements: February-payment of $6,000 cash dividend.

The company's cash balance on January 1, 2017, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.

Instructions

Question (a) Prepare schedules for expected collections from customers and expected payments for direct materials purchases for January and February.

Question (b) Prepare cash budget for January and February in columnar form.