155000 165000 salaries and wages 70000 70000 65000

$155,000 $165,000
Salaries and wages . . . . . . . . . . . . . . . $70,000 $70,000 $65,000
Advertising . . . . . . . . . . . . . . . . . . . . . . $80,000 $90,000 $100,000
Rent payments . . . . . . . . . . . . . . . . . . . $30,000 $30,000 $30,000
Depreciation . . . . . . . . . . . . . . . . . . . . . $40,000 $40,000 $40,000
Merchandise purchases are paid in full during the month following purchase.
Accounts payable for merchandise purchases on June 30, which will be paid during
July, 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 and
repaid 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
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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)
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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 each
month, can the loan be repaid as planned? Explain.