Reference no: EM132944318

Wildhorse Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows:

                                                  January                 February

Sales                                   $352,000           $400,000

Direct materials purchases         119,000          109,000

Direct labour                           86,000            113,000

Manufacturing overhead             60,000             76,000

Selling and administrative expenses 74,000           80,000

All sales are on account. Wildhorse expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase.

Other data are as follows:

1. Credit sales: November 2022, $198,000; December 2022, $281,000

2. Purchases of direct materials: December 2022, $90,000

3. Other receipts: January-collection of December 31, 2022, notes receivable $4,000; February-proceeds from sale of securities $5,000

4. Other disbursements: February-payment of $19,000 for land

The company expects its cash balance on January 1, 2023, to be $51,000. It wants to maintain a minimum cash balance of $41,000.

Problem (a) Prepare schedules for the expected collections from customers and the expected payments for direct materials purchases.