Budgeting for Cash Collections and Cash Payments. Hershels Chocolate produces chocolate bars. The treasurer at Hershels Chocolate is preparing the cash budget and would like to know when cash collections from sales and cash payments for materials will occur. The dollar amount of the companys quarterly sales and direct materials purchases are projected to be as follows (this information is the result of working the previous problems for Hershels Chocolate):

	1st	2nd	3rd	4th
Sales	$2,000,000	$2,100,000	$2,200,000	$2,425,000
Direct materials purchases	$1,215,000	$1,276,125	$1,349,400	$1,417,575

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? All sales are made on credit. The company expects to collect 60 percent of sales in the quarter of sale and 40 percent the quarter following the sale. Accounts receivable at the end of last year totaled $770,000, all of which will be collected during the first quarter of this coming year.

? All direct materials purchases are on credit. The company expects to pay 80 percent of purchases in the quarter of purchase and 20 percent the following quarter. Accounts payable at the end of last year totaled $257,000, all of which will be paid during the first quarter of this coming year.

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Figure 9.11

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Please show all the steps and write full explanations to the following questions:

a. Prepare a budget for cash collections from sales. Refer to the format shown at the top of Figure 9.11 "Cash Budget for Jerrys Ice Cream".

b. Prepare a budget for cash payments for purchases of materials. Refer to the format shown in the middle section of Figure 9.11 "Cash Budget for Jerrys Ice Cream".

c. How will the treasurer use this information?

Jerry's Ice Cream Cash Budget Year Ending December 31 Quarter 2 4 Year Cash collections from sales* $ 180,000 144,000 Fourth quarter prior year (assumed) First quarter ($240,000 sales) Second quarter ($288,000 sales) Third quarter ($360,000 sales) Fourth quarter ($312,000 sales) $180,000 240,000 288,000 360,000 187,200 331,200 $1,255,200 96,000 172,800 115,200 216,000 144,000 187,200 Total cash collections $324,000 268,800 $ 331,200 Cash payments for purchases of materials** (30,000) (59,472) Fourth quarter prior year (assumed) First quarter ($84,960 purchases) Second quarter ($102,400 purchases) Third quarter ($115,200 purchases) Fourth quarter ($101,920 purchases) (30,000) (84,960) (102,400) (34,560)(115,200) (71,344) $ (89,472)(97,168 $(111,360) $(105,904)$ (403,904) (25,488) (71,680) (30,720) (80,640) (71,344) Total cash payments for purchases Other cash payments*** Direct labor Manufacturing overhead*** Selling and administrative Capital expenditures (53,040) (45,400) (55,000) (63,960) (49,600) (55,000) (76,960) (54,600) (55,000) (66,560)(260,520) (50,600) (55,000) (25,000) (200,200) (220,000) (25,000) Total other cash payments 60 (186,560 197,160 705,720) 160 $(705,720 Excess of collections over paymentsA Beginning cash balanceAA Ending cash balanceAAA 33,280 94,160 127,440 3,072 81,088 10,000 28,136 127,440 145,576 91,088 $ 91,088 94,160 10,00 155,576 155,576