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Horngren'S Financial And Managerial Accounting
Found in: Page 1247

Short Answer

Question: Preparing a financial budget—schedule of cash receipts, schedule cash payments, cash budget

Baxter Company’s budget committee provides the following information: December 31, 2017, account balances:

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February 2018. Assume no financing took place.

Answer

The ending balance of cash is $64,425 for January and $93,348 for February.

See the step by step solution

Step by Step Solution

Step 1: Preparation of schedule of cash receipts from customers 

Baxter Company

Schedule of cash receipts from customers

For January and February, 2018

January

February

Total Sales

$81,000

$82,800

Cash receipts from customers (80% of Sales)

$64,800

$66,240

Cash receipts from last quarter

$19,000

$16,200

Total cash received from customers

$83,800

$82,440

Step 2: Preparation of schedule of cash payments

Baxter Company

Schedule of cash payments from purchases

For January and February, 2018

January

February

Total purchases

$40,600

$41,500

Cash payments:

Purchases (60%)

$24,360

$24,900

Remaining purchases (40%)

$11,000

$16,240

Total cash paid

$35,360

$41,140

 Step 3: Preparation of schedule of cash payments

Baxter Company

Schedule of selling and administrative expenses

For January and February, 2018

January

February

Salaries

$2,820

$3,500

Commission

$2,395

$4,077

Rent

$2,400

$2,400

Income tax expense

$2,400

$2,400

Total expenses

$10,015

$12,377

 Step 4: Preparation of schedule of cash budget

Puckett Company

Cash Budget

For the first quarter, 2018

January

February

Opening cash balance

$26,000

$64,425

Cash receipts

$83,800

$82,440

Cash paid for purchases

$35,360

$41,140

Cash paid for expenses

$10,015

$12,377

Cash ending balance

$64,425

$93,348

Most popular questions for Business-studies Textbooks

Computing and journalizing standard cost variances

Moss manufactures coffee mugs that it sells to other companies for customizing with their own logos. Moss prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 59,800 coffee mugs per month:

Direct material (0.2 lbs. @$0.25 per lb)

$0.05

Direct Labor (3 minutes @ $0.11 per minute)

0.33

Manufacturing Overhead:

Variable (3 minutes @ $0.06 per minute)

$0.18

Fixed (3 minutes @ $0.13 per minute)

0.39

0.57

Total Cost per Coffee Mug

$0.95

Actual cost and production information for July 2018 follows:

a. There were no beginning or ending inventory balances. All expenditures were on account.

b. Actual production and sales were 62,500 coffee mugs.

c. Actual direct materials usage was 11,000 lbs. at an actual cost of $0.17 per lb.

d. Actual direct labor usage was 197,000 minutes at a total cost of $25,610.

e. Actual overhead cost was $10,835 variable and $29,765 fixed.

f. Selling and administrative costs were $95,000.

Requirements

1. Compute the cost and efficiency variances for direct materials and direct labor.

2. Journalize the purchase and usage of direct materials and the assignment of direct labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead cost and efficiency variances and the fixed overhead cost and volume variances.

4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work­-in­-Process Inventory. Journalize the adjusting of the Manufacturing Overhead account.

5. Moss intentionally hired more highly skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

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