Question

Question: Preparing a financial budget—schedule of cash receipts, schedule of cash payments, cash budget

Puckett Company has provided the following budget information for the first quarter of 2018:

Total sales \( 216,000

Budgeted purchases of direct materials 40,600

Budgeted direct labor cost 36,800 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 1,025

Depreciation 1,000

Insurance and property taxes 6,650

Budgeted selling and administrative expenses:

Salaries expense 14,000

Rent expense 2,500

Insurance expense 2,000

Depreciation expense 350

Supplies expense 4,320

Additional data related to the first quarter of 2018 for Puckett Company:

a. Capital expenditures include \)41,000 for new manufacturing equipment to be purchased and paid in the first quarter.

b. Cash receipts are 75% of sales in the quarter of the sale and 25% in the quarter following the sale.

c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

e. Income tax expense for the first quarter is projected at \(49,000 and is paid in the quarter incurred.

f. Puckett Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.

g. The December 31, 2017, balance in Cash is \)25,000, in Accounts Receivable is \(21,600, and in Accounts Payable is \)16,500.

Requirements

1. Prepare Puckett Company’s schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.

2. Prepare Puckett Company’s cash budget for the first quarter of 2018.

Short answer

Answer

The ending balance of cash is $14,505.

Step-by-step solution

Preparation of schedule of cash receipts from customers

Puckett Company Schedule of cash receipts from customers For the first quarter, 2018
	First Quarter
Total Sales	$216,000
Cash receipts from customers (75% of Sales)	$162,000
Cash receipts from last quarter	$21,600
Total cash received from customers	$183,600

 Step 2: Preparation of schedule of cash payments

Puckett Company Schedule of cash payments For the first quarter, 2018
	First Quarter
Total direct material purchases	$40,600
Cash payments:
Direct material purchased (50%)	$20,300
Accounts payable	$16,500
Direct labor cost	$36,800
Variable manufacturing overhead	$1,025
Fixed manufacturing overhead	$6,650
Salaries	$14,000
Rent expense	$2,500
Insurance expense	$2,000
Supplies expense	$4,320
Capital expenditure	$41,000
Income tax expenses	$49,000
Total cash payments	$194,095

Preparation of schedule of cash budget

Puckett Company Cash Budget For the first quarter, 2018
	First Quarter
Opening cash balance	$25,000
Cash receipts	$183,600
Total cash payments	$194,095
Ending cash balance	$14,505