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Problem 20-3A Merchandising: Preparation and analysis of cash...
Problem 20-3A Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO C2, P2.
Aztec Company sells its product for $170 per unit. Its actual and projected sales follow.
April (actual) 9,500 $1,615,000
May (actual) 2,400 408,000
June (budgeted) 7,000 1,190,000
July (budgeted) 8,000 1,360,000
August (budgeted) 4,100 697,000
All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 29% in the second month after the sale, and 1% proves to be uncollectible. The product's purchase price is $110 per unit. All purchases are payable within 11 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 18% of the next month's unit sales plus a safety stock of 195 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,716,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $120,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $120,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $30,500 and the company's cash balance is $120,000. (Round final answers to the nearest whole dollar.)
1. Problem 20-3A Part 1
1. Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
Percent Collected in
April May June July August
Credit sales from:
Amount Collected in
Total April May June July August
Credit sales from:
April $ 1,615,000 _____________________________________________________________________
May 408,000 ____________________________________________________________________
June 1,190,000 ____________________________________________________________________
July 1,360,000 ____________________________________________________________________
2. Problem 20-3A Part 2
2. Prepare a table that show the computation of budgeted ending inventories (in units) for April, May, June and July.
Budgeted Ending Inventory
For April, May, June and July
April May June July
Nextmonth's budgeted sales (units)_____________________________________________________
Ratio of inventory to future sales ______________________________________________________
Budgeted "base" ending inventory______________________________________________________________
3. Problem 20-3A Part 3
3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of
purchases for each month.
Merchandise Purchases Budgets
For May, June, and July
May June July
Required units of available merchandise____________________________________________________________________________
Budgeted purchases (units)__________________________________________________________________________________________
Budgeted cost of merchandise purchases___________________________________________________________________________
4. Problem 20-3A Part 4
4. Prepare a table showing the computation of cash payments on product purchases for June and July.
Cash payment on product purchases (for June and July)
-----------------------Percent Paid in----------------------
May June July
From purchases in:__________________________________________________________________________
---------------------Amount Paid in-------------------------
Total May June July
From purchases in:
Answered by Fintutor
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