Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Indigo Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: January February Sales $352,000 $397,000 Direct materials purchases 122,000

Indigo Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows:

January

February

Sales

$352,000 $397,000

Direct materials purchases

122,000 110,000

Direct labour

86,000 113,000

Manufacturing overhead

60,000 74,000

Selling and administrative expenses

74,000 80,000

All sales are on account. Indigo expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. Other data are as follows:

1. Credit sales: November 2022, $199,000; December 2022, $282,000
2. Purchases of direct materials: December 2022, $89,000
3. Other receipts: Januarycollection of December 31, 2022, notes receivable $4,000; Februaryproceeds from sale of securities $6,000
4. Other disbursements: Februarypayment of $21,000 for land

The company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a minimum cash balance of $40,000.

Prepare schedules for (1) the expected collections from customers.

Month

January

February

November

$enter a dollar amount $enter a dollar amount

December

enter a dollar amount enter a dollar amount

January

enter a dollar amount enter a dollar amount

February

enter a dollar amount enter a dollar amount
$enter a total amount $enter a total amount

(2) the expected payments for direct materials purchases.

Month

January

February

December

$enter a dollar amount $enter a dollar amount

January

enter a dollar amount enter a dollar amount

February

enter a dollar amount enter a dollar amount
$enter a total amount $enter a total amount

Prepare a cash budget for January and February using columns for each month.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions