Alpha, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Aptech, the firm’s marketing director, has completed the following sales forecast."

Month Sales

January $900,000

February $1,000,000

March $900,000

April $1,100,000

May $850,000

June $950,000

July $1,150,000

August $1,500,000

September $1,600,000

October $1,600,000

November $1,500,000

December $1,700,000

                                                                                                                                                          

·        George, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. she has gathered the following information.

·        All sales are made on credit.                                                                                      

·        Alpha’s excellent record in accounts receivable collection is expected to continue, with 60% of sales collected in the month after sale and the remaining 40 percent collected two months after the sale.                                                                                               

·        Inventory purchased in the months of April, May and June are $495,000, $382,500 and $427,500 respectively.                                                   

·        All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase.         

·        Hourly wages and fringe benefits, estimated at 30% of the current month’s sales, are paid in the month incurred.                                                                                                         

·        General and administrative expenses are projected to be $1,473,000 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter. (divide each expense by 12 to get the monthly expenditure, except property taxes which should be divided by 4 to get quarterly taxes).

Salaries and fringe benefits $315,000

Advertising 360,000

Property Taxes 80,000

Insurance 192,000

Utilities 180,000

Depreciation 346,000

Total $1,473,000

                                                                      

· Alpha maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12% line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $50,000.

Required:

1. Prepare the cash receipts budget for the second quarter.                                          
2. Prepare the cash payments budget for the second quarter.                                      
3. Prepare the cash budget for the second quarter.

Answer rating: 100% (QA)

Cash Receipt Budget Particulars Feb March April May June Sales 1000000 900000 1100000 850000 950000 ... View the full answer