LJ Company prepares monthly cash budgets. Relevant data from operating budgets

| April 14, 2018

LJ Company prepares monthly cash budgets. Relevant data from operating budgetsfor 2016 are as follows.JanuaryFebruarySales$360,000$400,000Inventory purchases120,000125,000Salaries wages90,000100,000Other production on expenses70,00085,000Selling & Administration expenses79,00085,000All 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 followingthe sale. Sixty percent (60%) of inventory purchases are paid in the month of thepurchase, and the balance due is paid in the month following the purchase. Allother items above are paid in the month incurred except for selling and administrative expenses that include $1,000 of depreciation per month.Other data:Credit sales: November 2015, $250,000; December 2015, $320,000.Purchases of inventories: December 2015, $100,000.Other receipts: January collection of December 31, 2015, notes receivable $15,000; February–proceeds from sale of securities $6,000.Other disbursements: February–payment of $6,000 cash dividend.The company’s cash balance on January 1, 2016, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.REQUIRED:Prepare schedules for (i) expected collections from customers and (ii) expected payments for inventory purchases for January and February.Prepare a Cash Budget for January and February

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