Question

Blossom Company prepares monthly cash budgets. Relevant data from operating budgets for 2020 are as follows. Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January $403,200 134,400 100,800 78,400 88,180 February $448,000 140,000 112,000 84,000 95,200 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 that include $1,120 of depreciation per month. Other data: 1. 2. 3. Credit sales: November 2019, $280,000; December 2019, $358,400. Purchases of direct materials: December 2019, $112,000. Other receipts: January-Collection of December 31, 2019, notes receivable $16,800; February-Proceeds from sale of securities 56,720. Other disbursements: February-Payment of S6,720 cash dividend. 4. The company's cash balance on January 1, 2020, is expected to be $57,200. The company wants to maintain a minimum cash balance of $56,000. Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February. Expected Collections from Customers January February November December January February Total collections

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Answer 1

Answer: - 01 Expected callectiong From customere - January February $ November December 56,000 107520 2.01.600 71,680 120,960 January February - 2,24.0oo. Teetal Collection & 3,65, 120 4,16,640 ② Expected payment for direct material - January February December January February $ 44,800 80,640 53.760 84, oro 1,37, 760 Totul Payments $ 1,25,4VO

cash Budser for January 8 februar Blossom Company cach Budget January february (A) Recepts :- ($) 3,65,120 4,16,640 Collection from customer other receipts (notes Receivable) (Proceed from sale of security) 16,800 6,720 Secu Total Receipts 3,81,920 4,23,369 (B) Payment .- Payment for czect Material $ 1525,4uo $1,37,760 Direct Labour 1.oo Boo 1112,000 Manufacturing overhead 78,400 84, vor Selling Sadministratinee 87, 360 guogo other payment (Payment of cash dreidend) - 6.720 Teted Payment (A - By Net Receipts ( Payment) cash at the beginning 392,000 (1008) 67,200 4,3456 (11,200 57120 cach at end 57,120 46,550

Nale: calculation or selling and to admin- instratince expenses wluch ux paid in came January February Sa selling s admini- Stoate espeses & 88.480 95.200 less depreciatioro (120) (120) 27, 360 94020 cash balance in January end - 157120 (456000 limit maurteensel) but cash balance at the end of February us $ 16000 and To maintain the minimum w cash balance limit company atience to warance &. 10 var amount in monthe of february