10SE

Question

Preparing a financial budget—schedule of cash payments

Barnes Company budgeted direct materials purchases of $191,990 in January and $138,610 in February. Assume Barnes pays for direct materials purchases 60% in the month of purchase and 40% in the month after purchase. The Accounts Payable balance on January 1 is $75,000. Prepare a schedule of cash payments for purchases for January and February. Round to the nearest dollar.

Step-by-Step Solution

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Answer

The total cash paid for purchases is $190,194 and $159,962 for January and February respectively.

1Step 1: Meaning of financial budget

A financial budget is a detail record of the expenses and the revenues.

2Step 2: Schedule of cash receipts from customers

Particulars	January	February
Total budgeted purchases	$191,990	$138,610
Cash receipts from customers
Cash received in the month of purchases (60%)	$115,194	$83,166
Cash received in the month after purchases (40%)	$75,000	$76,796
Total cash payments for purchases	$190,194	$159,962

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