Question

Janus Products, Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:

 

1. Budgeted monthly absorption costing income statements for July to October are as follows:

 

	July				August				September				October
Sales	$	52,000			$	82,000			$	62,000			$	57,000
Cost of goods sold		28,800				46,800				34,800				31,800
Gross margin		23,200				35,200				27,200				25,200
Selling and administrative expenses:
Selling expense		10,800				14,100				9,700				8,500
Administrative expense*		6,250				8,400				7,300				7,100
Total selling and administrative expenses		17,050				22,500				17,000				15,600
Net operating income	$	6,150			$	12,700			$	10,200			$	9,600

 

*Includes $2,600 depreciation each month.

 

2. Sales are 20% for cash and 80% on credit.

3. Credit sales are collected over a three-month period, with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totalled $42,000, and June sales totalled $48,000.

4. Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% are paid in the following month. Accounts payable for inventory purchases at June 30 total $17,700.

5. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $24,000.

6. Land costing $5,100 will be purchased in July.

7. Dividends of $1,600 will be declared and paid in September.

8. The cash balance on June 30 is $9,200; the company must maintain a cash balance of at least this amount at the end of each month.

9. The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Prepare a cash budget for July, August, and September and for the quarter in total. (Roundup "Borrowing" and "Repayments" answers to the nearest whole dollar amount. Any "Repayments" and "Interest" should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.)

i am looking for beginning cash balance and the interest.