Question

Check my wor 6 The president of the retailer Prime Products has just approached the company's bank with a request for a $75,000, 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: 10 points a. On April 1, the start of the loan period, the cash balance will be $42,600. Accounts receivable on April 1 will total $184,800, of which $158,400 will be collected during April and $21,120 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 eBook 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: Print May $ 280,000 522,000 299,000 $241,000 170, 500 139, 500 $ 23,000 23, 000 26, 600 $ 23,000 23, 000 $ 23, 000 $ 60, 400 $ 60,400 78,020 r1 Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation References 108, 000 $ 28,000 28,000 $ 28,000 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 $180,000 d. In preparing the cash budget, assume that the $75,000 loan will be made in April and repaid in June. Interest on the loan will total $1,100 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. Complete this question by entering your answers in the tabs below Required 1 Required 2 Prepare a cash budget, by month and in total, for the three-month period. (Cash deficiency, repayments and interest should be indicated by a minus sign.) Prime Products Cash Budget April May June Quarter Beginning cash balance Add receipts Collections from customers Total cash available Less cash disbursements Merchandise purchases Payroll Lease payments Advertising Equipment purchases Total cash disbursements Excess (deficiency) of cash available over disbursements Financing Borrowings Repayments Interest Total financing Ending cash balance K Required 1 Required 2 Required 1Required 2 Calculate the expected cash collections for April, May, and June, and for the three months in total. April May June Quarter Total cash collections Required 2 >

Answer 1

Asgoril June Quarter 179,520 [Given] $274,400 [$280,000 x 30%; $280,000 x 60%; $280,000 x 8%) $469,800 [ $522,000 x 30%; $522,000 x 60% Beginning receivable collectec $158,400 April's sales collected May's sales collected June's sales collected Total cash collections$242,400 $21,120 $168,000 $156,600 $84,000 $22,400 $313,200 [S299,000x 30%) $345,720 $425,300 $1,013,420

Requirement-2: Prime Products Cash Budget Ma une Quarter April $42,600 $73,600 $71,920 $42,600 [Previous month's ending balance] $242,400 $345,720 $425,300 $1,013,420 [Ref: Requirement-1] $285,000 $419,320 $497,220 $1,056,020 - ->(a) Beginning cash balance Cash receipts Total cash available Less cash disbursements: Merchandise purchase Payroll Lease Payment Advertising Equipment purchase Total cash disbursements $180,000 $241,000 $170,500 $591,500 [Previous month's purchase paid in current month] $23,000 $23,000 $26,600 $23,000 $23,000 $23,000 $72,600 $69,000 $60,400 $60,400 $78,020 $198,820 $108,000 $406,120 $1,400$71,920$91,100 $108,000 1,039,920 --> $0 S286,400 S $347,400 (b) $16,100 --> (c) (a) (b) Excess (Deficit) cash balance Financing: $75,000 $0 $0 $75,000 $73,600 $0 $75,000 $0 Borrowings Repayments Interest Total financing $0 $75,000 -$75,000 [Given] $1,100 [Given] $0-$1,100 $0 -$76,100 $71,920 $15,000 S1,100 -->(d $15,000 - -> (c) (d) Ending cash balance (As depreciation is a non-cash expense and it doesn't involve cash outflow, it is not considered in the cash budget)