Question

1. The president of Univax, Inc, has just approached the company's bank seeking short-term financing for the coming year, loan request must be accompanied by a detailed cash budget that shows the quarters in which financing will be needed, as well as the amounts that will be needed and the quarters in which repayments can be made. Year 2. Univax is a distributor of commercial vacuum cleaners. The bank has stated that the To provide this information for the bank, the president has directed that the following data be gathered from which a cash budget can be prepared: a. Budgeted sales and merchandise purchases for Year 2, as well as actual sales and purchases for the last quarter of Year 1, are as follows: Sales Purchases Year 1: Fourth quarter actual $390,000 $290,000 Year 2 First quarter estimated Second quarter estimated Third quarter estimated Fourth quarter estimated $490,000 $370,000 $420,000 $480,000 $350,000 $590,000 $690,000 $570,000 b. The company typically collects 48% of a quarter's sales before the quarter ends and another 50% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the actual data for the Year 1 fourth quarter in the following quarter the fixed amount, $19,000 each quarter is depreciation. C. Some 15% of a quarter's merchandise purchases are paid for within the quarter. The remainder is paid d. Selling and administrative expenses for Year 2 are budgeted at $83,000 per quarter plus 8% of sales. Of e. The company will pay $13,000 in cash dividends each quarter f. Land purchases will be made as follows during the year: $85,000 in the second quarter and $48,900 in g. The Cash account contained $40,000 at the end of Year 1. The company must maintain a minimum h. The company has an agreement with a local bank that allows the company to borrow in increments of the third quarter. cash balance of at least $38,000 $10,000 at the beginning of each quarter, up to a total loan balance of $100,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the year At present, the company has no loans outstanding. i. Required: 1a. Prepare a schedule of expected cash collections on sales by quarter and in total for Year 2. (Leave no cells blank -be certain to enter "" wherever required. Omit the "$" sign in your response.) Schedule of Expected Cash Collections 1a. Prepare a schedule of expected cash collections on sales by quarter and in total for Year 2. (Leave no cells blank- be certain to enter "O" wherever required. Omit the "$" sign in your response.) Schedule of Expected Cash Collections Year 2 Quarter irst Total $195,000 480,200 578,200 676,200 273,600 Year 1- Fourth quarter sales Year 2- First quarter sales Year 2 -Second quarter sales Year 2 Third quarter sales Year 2- Fourth quarter sales $ 195,000S $235,200 245,000 283,200 295,000 331,200 345,000 273,600 430,200 528,200 626,200 618,600 2,203,200 Total cash collections 1b. Prepare a schedule of expected cash disbursements for merchandise purchases, by quarter and in total for Year 2. (Leave no cells blank - be certain to enter "O" wherever required. Omit the "$" sign in your response.) Schedule of Expected Cash D Year 2 Quarter First Third Fourth Total Year 1-Fourth quarter purchases Year 2-First quarter purchases Year 2 Second quarter purchases Year 2 Third quarter purchases Year 2- Fourth quarter purchases S 246,500S S246,500 370,000 420,000 480,000 52,500 55,500 314,500 63,000 357,000 72,000 408,000 52,500 Total cash disbursements S 302,000 377,500S429,000 460,500 S1,569,000 2. Compute the expected cash disbursements for selling and administrative expenses, by quarter and in total, for Year 2. (Omit the "S sign in your response) Cash $103,200 $ 111,200 First Second 2. Compute the expected cash disbursements for selling and administrative expenses, by quarter and in total, for Year 2. (Omit the "$" sign in your response.) Cash $ 103,200 $ 111,200 $ 119,200 $ 109,600 First Second Third Fourth $ 443,200 Year 3. Prepare a cash budget by quarter and in total for Year 2. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank be certain to enter "O" wherever required. Omit the "$" sign in your response.) Univax, Inc. Cash Budget Year 2 Quarter First Fourth Cash balance, beginning Add collections from sales Total cash available Less disbursements: Operating expenses Dividends Land Excess (deficiency) of receipts over disbursements Financing Repayments S443,200 3. Prepare a cash budget by quarter and in total for Year 2. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank be certain to enter "O" wherever required. Omit the "$" sign in your Univax, Inc. Cash Budget Year 2 First Third Fourth Cash balance, beginning Add collections from sales Total cash available Less disbursements: Operating expenses Dividends Land Excess (deficiency) of receipts over disbursements Financing: Repayments Interest Total financing Cash balance, ending

Answer 1

Cash Budget	First	Second	Third	Fourth	Year
Cash beginning balance	40000	52000	43500	59600	40000
Add: collections from sale	430200	528200	626200	618600	2203200
Total cash available	470200	580200	669700	678200	2243200
Less: Disbursements
Merchandise purchases	302000	377500	429000	460500	1569000
Operating expenses	103200	111200	119200	109600	443200
Dividends	13000	13000	13000	13000	52000
Land		85000	48900		133900
Total Disbursements	418200	586700	610100	583100	2198100
Excess/(Deficiency) of receipts over disbursements	52000	-6500	59600	95100	45100
Financing:
Borrowings		50000			50000
repayments				-50000	-50000
Interest				-1500	-1500
Total Financing		50000			50000
Cash balance , ending	52000	43500	59600	43600	43600

Interest = 50000 * 1% * 3 months = 1500