P23-4BDerby Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are: Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January February $350,000 $400,000 110,000 120.000 85,000 115,000 60,000 75.000 75,000 80,000 All sales are on account. Collections are expected to be: 60% in the month of sale, 25% in the first month following the sale, and 15% in the second month following the sale. As to cash payments (disbursements): 30% of direct materials purchases are paid in cash in the month of purchase, 70% is paid in the month following the purchase. All other items above are paid in the month incurred. Depreciation has been excluded from manufacturing over-head and selling & admin expenses. Other data: 1. Credit sales: November 2016, $200,000; December 2016, $290,000 Purchases of direct materials: December 2016, $90,000. Other receipts Jan - collection of Dec 31, 2016, interest receivable $3,000; Feb - proceeds from sale of securities $5,000. 4. Other disbursements: Feb - payment of $20,000 for land. The company's cash balance on January 1, 2017, is expected to be $50,000. The company wants to maintain a minimum cash balance of $40,000. Instructions (a) Prepare schedules for: (1) expected collections from customers and (2) expected payments for direct materials purchases. (b) Prepare a cash budget for January and February in columnar form. (a) #1 Expected Collections from Customer January Februa November ($200,000) December (290,000) January (350,000) February (400,000) Total Collections (a) #2 Expected Payments for Direct Materials January February December ($ 90,000) January (110,000) February (120,000) Total Collections Derby Company CASH Budget JAN & FEB 2017 January February 50,000 $ 49.500 Beginning Cash Balance ADD: Receipts: Collection from customers (a) #1 Total Receipts Total Available Cash LESS: Disbursements: Direct Materials (a) #2 Total Disbursements Excess (deficiency) of Available Cash over Cash Disbursements Financing: Ending Cash Balance