Sunny and Clear, Inc. is a small wholesale distributor of consumer goods. The company generates a gross margin shown in the blue table. The percent of cash sales is shown in the blue table; the remainder is sold on account and is collected one month later. Accounts receivable on June 30, 2020 are the result of June credit sales. Actual and budgeted sales for the period were as follows:

June (actual)	$45,000
July	$52,000
August	$56,000
September	$60,000
October	$48,000

Gross Margin	23%
Cash Sales	26%
Ending Inventory	35%
Inventory purchases paid in cash	48%
Other Expenses	8%

The company plans for each month's ending inventory to be the blue table percentage of the following month's budgeted cost of goods sold. Inventory cash purchases are shown in the blue table; the rest is paid for in the following month. The accounts payable on June 30 are the result of June purchases of inventory. All monthly expenses were paid monthly. Monthly expenses included: commissions, $9,000; rent, $1,200; other expenses (excluding depreciation), are reflected in the blue able as a percent of sales. Depreciation is $1,300 for the quarter and includes depreciation on new assets acquired during the quarter. The assets acquired for cash during the quarter included equipment of $2,100 in July and $3,000 in August. The company wishes to maintain a minimum cash balance of $3,000 at the end of each month. The company has a financing facility that allows the company to borrow in increments of $1,000 at the beginning of each month from a local bank, up to a total loan balance of $30,000. The interest rate on these loans is 1.5% per month, and interest is not compounded. The company, when able, repays the loan plus accumulated interest at the end of the quarter.

Current assets as of June 30:
Cash	$4,000
Accounts receivable	$29,250
Inventory	$7,100
Buildings and equipment, net	$102,550
Accounts payable	$22,400
Capital stock	$99,000
Retained earnings	$21,500

Required:

Using the data above, for quarter ending September 2020, prepare the following:

a. The schedule of the expected cash collections

b. The merchandise purchases budget:

c. The schedule of expected cash disbursements – merchandise purchases.

d. schedule of expected cash disbursement –Selling and administrative expenses

e. The cash budget:

f. An absorption costing income statement, for the quarter ending September 2020

g. A balance sheet as of September 30, 2020

Provide a short write up (2-3 paragraphs) of the cashflow situation at this company after you completed the budgets.

What are your concerns and what would you recommend to management?

Answer rating: 100% (QA)

aThe schedule of the expected cash collections is as follows July 52000 26 13520 52000 74 38480 August 56000 26 14560 56000 74 41440 September 60000 26 15600 60000 74 44400 October 48000 26 12480 4800... View the full answer