a. On April 1, the start of the loan period, the cash balance will be $41,800....

 

 

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a. On April 1, the start of the loan period, the cash balance will be $41,800. Accounts receivable on April 1 will total $182,000, of which $156,000 will be collected during April and $20,800 will be collected during May. The remainder will be uncollectible. b. Past experience shows that 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the three- month period follow: sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April $ 316,000 $ 214,000 $ 34,200 $ 31,600 $ 74,000 50 $ 31,000 May $575,000 $ 193,000 $ 34,200 $ 31,600 $ 74,000 $0 $ 31,000 June $ 264,000 $ 151,500 $ 27,300 $31,600 $ 43,000 $ 70,500 $ 31,000 c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $175,000. d. In preparing the cash budget, assume that the $73,000 loan will be made in April and repaid in June. Interest on the loan will total $1,080. Required: 1. Calculate the expected cash collections for April, May, and June, and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period. Beginning cash balance. Add receipts: Collections from customers Total cash available Less cash disbursements: Merchandise purchases Payroll Lease payments Advertising Equipment purchases Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance Prime Products Cash Budget April May June Quarter a. On April 1, the start of the loan period, the cash balance will be $41,800. Accounts receivable on April 1 will total $182,000, of which $156,000 will be collected during April and $20,800 will be collected during May. The remainder will be uncollectible. b. Past experience shows that 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the three- month period follow: sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April $ 316,000 $ 214,000 $ 34,200 $ 31,600 $ 74,000 50 $ 31,000 May $575,000 $ 193,000 $ 34,200 $ 31,600 $ 74,000 $0 $ 31,000 June $ 264,000 $ 151,500 $ 27,300 $31,600 $ 43,000 $ 70,500 $ 31,000 c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $175,000. d. In preparing the cash budget, assume that the $73,000 loan will be made in April and repaid in June. Interest on the loan will total $1,080. Required: 1. Calculate the expected cash collections for April, May, and June, and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period. Beginning cash balance. Add receipts: Collections from customers Total cash available Less cash disbursements: Merchandise purchases Payroll Lease payments Advertising Equipment purchases Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance Prime Products Cash Budget April May June Quarter