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Chapter 22: 10SE (page 1230)

Preparing a financial budget—schedule of cash payments

Barnes Company budgeted direct materials purchases of \(191,990 in January and \)138,610 in February. Assume Barnes pays for direct materials purchases 60% in the month of purchase and 40% in the month after purchase. The Accounts Payable balance on January 1 is $75,000. Prepare a schedule of cash payments for purchases for January and February. Round to the nearest dollar.

Short Answer

Expert verified

The total cash paid for purchases is $190,194 and $159,962 for January and February respectively.

Step by step solution

01

Meaning of financial budget

A financial budget is a detail record of the expenses and the revenues.

02

Schedule of cash receipts from customers

Particulars

January

February

Total budgeted purchases

$191,990

$138,610

Cash receipts from customers

Cash received in the month of purchases (60%)

$115,194

$83,166

Cash received in the month after purchases (40%)

$75,000

$76,796

Total cash payments for purchases

$190,194

$159,962

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Most popular questions from this chapter

Budgeting benefits List the three key benefits companies get from preparing a budget.

: Completing a comprehensive budgeting problem—merchandising company

Belton Printing Company of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for the month of April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:

As Belton Printing’s controller, you have assembled the following additional information:

a. April dividends of \(7,000 were declared and paid.

b. April capital expenditures of \)17,000 budgeted for cash purchase of equipment.

c. April depreciation expense, \(800.

d. Cost of goods sold, 55% of sales.

e. Desired ending inventory for April is \)24,800.

f. April selling and administrative expenses includes salaries of \(29,000, 20% of which will be paid in cash and the remainder paid next month.

g. Additional April selling and administrative expenses also include miscellaneous expenses of 10% of sales, all paid in April.

h. April budgeted sales, \)86,000, 80% collected in April and 20% in May.

i. April cash payments of March 31 liabilities incurred for March purchases of inventory, \(8,300.

j. April purchases of inventory, \)22,900 for cash and $37,200 on account. Half the credit purchases will be paid in April and half in May

Requirements

1. Prepare the sales budget for April.

2. Prepare the inventory, purchases, and cost of goods sold budget for April.

3. Prepare the selling and administrative expense budget for April.

4. Prepare the schedule of cash receipts from customers for April.

5. Prepare the schedule of cash payments for selling and administrative expenses for April.

6. Prepare the cash budget for April. Assume the company does not use short-term financing to maintain a minimum cash balance.

7. Prepare the budgeted income statement for April.

8. Prepare the budgeted balance sheet at April 30, 2018.

Preparing an operating budget—manufacturing overhead budget Bennett Company expects to produce 2,030 units in January that will require 8,120 hours of direct labor and 2,210 units in February that will require 8,840 hours of direct labor. Bennett budgets \(10 per unit for variable manufacturing overhead; \)2,100 per month for depre000ciation; and $78,460 per month for other fixed manufacturing overhead costs. Prepare Bennett’s manufacturing overhead budget for January and February, including the predetermined overhead allocation rate using direct labor hours as the allocation base.

Preparing an operating budget—production budget Bailey Company expects to sell 1,500 units of finished product in January and 1,750 units in February. The company has 180 units on hand on January 1 and desires to have an ending inventory equal to 80% of the next month’s sales. March sales are expected to be 1,820 units. Prepare Bailey’s production budget for January and February.

Preparing a financial budget—schedule of cash receipts

Victors expects total sales of \(702,000 for January and \)349,000 for February. Assume that Victor'ssales are collected as follows:

50% in the month of the sale

30% in the month after the sale

16% two months after the sale

4% never collected

November sales totaled \(388,000, and December sales were \)407,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.
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