Clay Corporation Has Projected Sales and Production in Units for the Second

question 2

Essay

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month. The accounts payable balance on March 31 totals $190,000, which will be paid in April.
All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $500,000 ($90,000 from February's sales and $410,000 from March's sales).
Required:
a. Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation.
b. Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation.

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Definitions:

Government Securities

Financial instruments issued by the government to finance its expenditures, offering a relatively safe investment.

Vault Cash

Paper currency and coins held by a bank in its vault and used to satisfy demands for withdrawals or to resolve deficits in reserve accounts.

Federal Securities

Financial instruments issued by the federal government, such as treasury bills and bonds, used to raise funds for governmental expenditures.

Common Stock

Common stock is a type of security that represents ownership in a corporation, with holders typically having voting rights and potential dividends.