155000 165000 Salaries and wages 70000 70000 65000 Advertising 80000 90000

# 155000 165000 salaries and wages 70000 70000 65000

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\$155,000 \$165,000Salaries and wages . . . . . . . . . . . . . . . \$70,000 \$70,000 \$65,000Advertising . . . . . . . . . . . . . . . . . . . . . . \$80,000 \$90,000 \$100,000Rent payments . . . . . . . . . . . . . . . . . . . \$30,000 \$30,000 \$30,000Depreciation . . . . . . . . . . . . . . . . . . . . . \$40,000 \$40,000 \$40,000Merchandise purchases are paid in full during the month following purchase.Accounts payable for merchandise purchases on June 30, which will be paid duringJuly, total \$160,000.d. Equipment costing \$25,000 will be purchased for cash during July.e. In preparing the cash budget, assume that the \$60,000 loan will be made in July andrepaid in September. Interest on the loan will total \$2,000.Required: 1. Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. From the given data above, we prepare the schedule of expected cash collections: July August September Quarter From account receivable: May sales Page 10
\$360,000 X 2% \$ 7,200 \$ 7,200 June sales \$280,000 x70% \$ 196,000 \$ 196,000 \$280,000 x2% \$ 5,600 \$ 5,600 From the budgeted sales: July sales \$350,000 X 25% \$ 87,500 \$ 87,500 \$350,000 X 70% \$ 245,000 \$ 245,000 \$350,000 X 2% \$ 7,000 \$ 7,000 August sales \$420,000 X 25% \$ 105,000 \$ 105,000 \$420,000 X 70% \$ 294,000 \$ 294,000 September sales \$360,000 X 25% \$ 90,000 \$ 90,000 Total cash collections \$ 290,700 \$ 355,600 \$ 391,000 \$ 1,037,300 2. Prepare a cash budget, by month and in total, for the third quarter. We have the following cash budget: July August September Quarter Beginning cash balance \$ 43,000 \$ 28,700 \$ 24,300 \$ 43,000 Add: cash collections \$ 290,700 \$ 355,600 \$ 391,000 \$ 1,037,300 Total cash available \$ 333,700 \$ 384,300 \$ 415,300 \$ 1,080,300 Less disbursements: Merchandise purchases \$ 160,000 \$ 170,000 \$ 155,000 \$ 485,000 Salaries and wages \$ 70,000 \$ 70,000 \$ 65,000 \$ 205,000 Advertising \$ 80,000 \$ 90,000 \$ 100,000 \$ 270,000 Rent payments \$ 30,000 \$ 30,000 \$ 30,000 \$ 90,000 Equipment purchases \$ 25,000 \$ - \$ - \$ 25,000 Total disbursements \$ 365,000 \$ 360,000 \$ 350,000 \$ 1,075,000 Excess \$ (31,300) \$ 24,300 \$ 65,300 \$ 5,300 Financing: Borrowings \$ 60,000 \$ - \$ - \$ 60,000 Repayments \$ - \$ - \$ (60,000) \$ (60,000) Page 11
Interest \$ - \$ - \$ (2,000) \$ (2,000) Total financing \$ 60,000 \$ - \$ (62,000) \$ (2,000) Ending cash balance \$ 28,700 \$ 24,300 \$ 3,300 \$ 3,300 3.If the company needs a minimum cash balance of \$20,000 to start eachmonth, can the loan be repaid as planned? Explain.

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