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

Beasley Company’s budget committee provides the following information:

December 31, 2017, account balances:

Cash \( 32,000 Accounts Receivable 19,000 Merchandise Inventory 16,000 Accounts Payable 15,000 Salaries and Commissions Payable 2,900 Budgeted amounts for 2018:

January February Sales, all on account \) 84,000 $ 84,400 Purchases, all on account 41,000 41,600 Commissions Expense 4,200 4,220 Salaries Expense 5,000 5,000 Rent Expense 2,200 2,200 Depreciation Expense 500 500 Insurance Expense 200 200 Income Tax Expense 1,900 1,900

Requirements

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 70% in the month of purchase and 30% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expense for January and February 2018. Assume 25% of the accrual for Salaries and Commissions Payable is for commissions and 75% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 70% in the month incurred and 30% 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. Assume no financing took place.

Step by step solution

01

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	$84,000	$84,400
Cash receipts from customers (80% of Sales)	$67,200	$67,520
Cash receipts from last quarter	$19,000	$16,800
Total cash received from customers	$86,200	$84,320

02

Preparation of schedule of cash payments

Baxter Company Schedule of cash payments from purchases For January and February, 2018
	January	February
Total purchases	$41,000	$41,600
Cash payments:
Purchases (70%)	$28,700	$29,120
Remaining purchases (40%)	$15,000	$12,300
Total cash paid	$43,700	$41,420

03

Preparation of schedule of cash payments 

Baxter Company Schedule of selling and administrative expenses For January and February, 2018
	January	February
Salaries	$5,000	$5,000
Commission	$4,200	$4,220
Rent	$2,200	$2,200
Income tax expense	$1,900	$1,900
Total	$13,300	$13,320

04

Preparation of schedule of cash budget

Puckett Company Cash Budget For the first quarter, 2018
	January	February
Opening cash balance	$32,000	$61,200
Cash receipts	$86,200	$84,320
Cash paid for purchases	$43,700	$41,420
Cash paid for expenses	$13,300	$13,320
Cash ending balance	$61,200	$90,780

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