Question

please finish all of them

The president of the retailer Prime Products has just approached the company's bank with a request for a $49,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months April through June, during which the loan will be used: a. On April 1, the start of the loan period, the cash balance will be $38,500. Accounts receivable on April 1 will total $148,400, of which $127,200 will be collected during April and $16,960 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 May June $ 480,000 $450,000 $ 327,000 $ 315,000 $ 183,000 $ 163,000 $ 21,400 $ 21,400 $ 19,800 $ 34,200 $ 34,200 $ 34,200 $ 74,600 $ 74,600 $ 65,800 - $ 75,000 $ 16,200 $ 16,200 $ 16,200 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 $186,000. d. In preparing the cash budget, assume that the $49,000 loan will be made in April and repaid in June. Interest on the loan will total $840. 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.

Answer 1

Expected Cash collections:
	April	May	June	Total
March Sales	127,200	16,960		144,160
April Sales	144,000	288,000	38,400	470,400
May Sales		135,000	270,000	405,000
June Sales			98,100	98,100
Cash Collections	271,200	439,960	406,500	1,117,660
2.Cash Budget
	April	May	June	Total
Beginning Cash Balance	38,500	42,500	37,260	38,500
Add: Collections	271,200	439,960	406,500	1,117,660
Cash available	309,700	482,460	443,760	1,156,160
Less: Payments
Purchases	186,000	315,000	183,000	684,000
Payroll	21,400	21,400	19,800	62,600
Lease	34,200	34,200	34,200	102,600
Advertising	74,600	74,600	65,800	215,000
Equipment Purchase			75,000	75,000
Total Disbursements	316,200	445,200	377,800	1,139,200
Excess/Deficiency	-6,500	37,260	65,960	16,960
Financing
Borrowing	49,000			49,000
Repayment			-49,000	-49,000
Interest			-840	-840
Total Financing	49,000	0	-49,840	-840
Ending Cash Balance	42,500	37,260	16,120	16,120
Note: Depreciation is a non-cash expense and hence is not taken into cash budget