Q1. Hayes Company prepares an annual cash budget by quarters.

Its cash budget is based on the

following assumptions.
1. The January 1, 2014, cash balance is expected to be $38,000. Hayes wishes to maintain a
balance of at least $15,000.
2. Hayes Company expects sales for the quarters are $180,000, $210,000, $240,000, $270,000.
Accounts receivable of $60,000 at December 31, 2013, are expected to be collected in full in the
first quarter of 2014. 60% are collected in the quarter sold and 40% are collected in the following
quarter. Accounts receivable of $60,000 at December 31, 2013, are expected to be collected in
full in the first quarter of 2014.
3. Short-term investments are expected to be sold for $2,000 cash in the first quarter.
4. Direct materials purchases for the quarters are $25,200, $29,200, $33,200, $37,200. 50% are
paid in the quarter purchased and 50% are paid in the following quarter. Accounts payable of
$10,600 at December 31, 2013, are expected to be paid in full in the first quarter of 2014.
5. Direct labor for the quarters are $62000, $72000, $82000, $92000. 100% is paid in the quarter
incurred.
6. Manufacturing overhead for the quarters are $57100, $60100, $63100, $66100. The
depreciation cost included in the amount is 3800 per month. All items except depreciation are
paid in the quarter incurred.
7. Selling and administrative expenses are $42000, $44000, $46000, $48000 and the depreciation
cost included in the amount is 1000 per month. All items except depreciation are paid in the
quarter incurred.
8. Management plans to purchase a truck in the second quarter for $10,000 cash.
9. Hayes makes equal quarterly payments of its estimated annual income taxes of $3000.
10. Loans are repaid in the earliest quarter in which there is sufficient cash. $100 interest is
charged on the loan and will be paid with the loan amount.
Q2. Colter Company prepares monthly cash budgets. Relevant data from operating budgets for
2014 are:

January February
Sales $360,000 $400,000
Direct materials purchases 120,000 125,000
Direct labor 90,000 100,000
Manufacturing overhead 70,000 75,000
Selling and administrative 79,000 85,000
expenses

 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 $1,000 of depreciation per month.

Other data:
1. Credit sales: November 2013, $250,000; December 2013, $320,000.
2. Purchases of direct materials: December 2013, $100,000.
3. Other receipts: January—collection of December 31, 2013, notes receivable $15,000;
February—proceeds from sale of securities $6,000.
4. Other disbursements: February—payment of $6,000 cash dividend.
5. The company’s cash balance on January 1, 2014, is expected to be $60,000. The company
wants to maintain a minimum cash balance of $50,000.

Instructions
(a) Prepare schedules for:

(1) Expected collections from customers and

(2) Expected payments for direct materials purchases for January and February.

(b) Prepare a cash budget for January and February in columnar form.