Question

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

Baxter Company’s budget committee provides the following information: December 31, 2017, account balances:

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February 2018. Assume no financing took place.

Short answer

Answer

The ending balance of cash is $64,425 for January and $93,348 for February.

Step-by-step solution

Preparation of schedule of cash receipts from customers 

Baxter Company Schedule of cash receipts from customers For January and February, 2018
	January	February
Total Sales	$81,000	$82,800
Cash receipts from customers (80% of Sales)	$64,800	$66,240
Cash receipts from last quarter	$19,000	$16,200
Total cash received from customers	$83,800	$82,440

Preparation of schedule of cash payments

Baxter Company Schedule of cash payments from purchases For January and February, 2018
	January	February
Total purchases	$40,600	$41,500
Cash payments:
Purchases (60%)	$24,360	$24,900
Remaining purchases (40%)	$11,000	$16,240
Total cash paid	$35,360	$41,140

 Step 3: Preparation of schedule of cash payments

Baxter Company Schedule of selling and administrative expenses For January and February, 2018
	January	February
Salaries	$2,820	$3,500
Commission	$2,395	$4,077
Rent	$2,400	$2,400
Income tax expense	$2,400	$2,400
Total expenses	$10,015	$12,377

 Step 4: Preparation of schedule of cash budget

Puckett Company Cash Budget For the first quarter, 2018
	January	February
Opening cash balance	$26,000	$64,425
Cash receipts	$83,800	$82,440
Cash paid for purchases	$35,360	$41,140
Cash paid for expenses	$10,015	$12,377
Cash ending balance	$64,425	$93,348