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
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$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
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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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