Problem $22-7$AA $($Algo$)$ Merchandising: Preparation of cash budgets with supporting purchases budgets LO P$4$

Aztec Company sells its product for $$160$ per unit. Its actual and budgeted sales follow.

$$May $($Actual$)$June $($Budget$)$July $($Budget$)$August $($Budget$)$Sales units$1,8005,5004,5004,300$Sales dollars$ $288,000$$ $880,000$$ $720,000$$ $688,000$

All sales are on credit. Collections are as follows: $22\%$ is collected in the month of the sale, and the remaining $78\%$ is collected in the month following the sale. Merchandise purchases cost $$110$ per unit. For those purchases, $60\%$ is paid in the month of purchase and the other $40\%$ is paid in the month following purchase. The company has a policy to maintain an ending monthly inventory of $21\%$ of the next month$$s unit sales. The May $31$ actual inventory level of $1,155$ units is consistent with this policy. Selling and administrative expenses of $$152,000$ per month are paid in cash. The company$$s minimum cash balance at month$-$end is $$110,000.$ Loans are obtained at the end of any month when the preliminary cash balance is below $$110,000.$ Any preliminary cash balance above $$110,000$ is used to repay loans at month$-$end. This loan has a $1\mathrm{.}0\%$ monthly interest rate. On May $31,$ the loan balance is $$46,500,$ and the company$$s cash balance is $$110,000.$

Required:

Prepare a schedule of cash receipts from sales for each of the months of June and July.

Prepare the merchandise purchases budget for June and July.

Prepare a schedule of cash payments for merchandise purchases for June and July. Assume May$$s budgeted merchandise purchases is $$283,470.$

Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.