Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows.

JanuaryFebruarySales$360,000$400,000Direct materials purchases120,000125,000Direct labor90,000100,000Manufacturing overhead70,00075,000Selling and administrative expenses79,00085,000

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, which include $1,000 of depreciation per month.

Other data:

1. Credit sales: November 2021, $250,000; December 2021, $320,000.
2. Purchases of direct materials: December 2021, $100,000.
3. Other receipts: Januarycollection of December 31, 2021, notes receivable $15,000; Februaryproceeds from sale of securities $6,000.
4. Other disbursements: Februarypayment of $6,000 cash dividend.

The company's cash balance on January 1, 2022, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.

Instructions

1. Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.
2. a. January: collections
3. $326,000; payments
4. $112,000
5. Prepare a cash budget for January and February in columnar form.
6. b. Ending cash balance:
7. January $51,000
8. February $50,000

Prepare purchases and income statement budgets for a merchandiser.