Question

3) The following information pertains to Amigo Corporation: Month July August September October November December Sales $30,000 34,000 38,000 42,000 48,000 60,000 Purchases $10,000 12,000 14,000 16,000 18,000 20,000 Cash is collected from customers in the following manner: Month of sale 40% Month following sale 40% Two months following sale 20% • 60% of purchases are paid for in cash in the month of purchase, and the other 40% is paid the following month. Required: Complete the cash budget for the 4th quarter. November December October $10,000 Beginning Balance: Cash Collections from August September October November December Total Cash Collections Total Cash Available Cash Payments from September October November December Total Cash Payments Ending Cash Balance Amigo has $50,000 principal loan balance and needs to pay it, but also needs to keep a $10,000 minimum balance. What month is the earliest that Amigo can pay off this loan while keeping the minimum cash balance? HI

Answer 1

	October	November	December
Beginning balance	$10,000	$33,600	$60,000
Cash collected from :
August	$6,800 ($34,000*20%)
September	$15,200 ($38,000*40%)	$7,600 ($38,000*20%)
October	$16,800 ($42,000*40%)	$16,800 ($42,000*40%)	$8,400 ($42,000*20%)
November		$19,200 ($48,000*40%)	$19,200 ($48,000*40%)
December			$24,000 ($60,000*40%)
Total cash collections	$38,800	$43,600	$51,600
Total cash available	$48,800	$77,200	$111,600
Cash payments from :
September	$5,600 ($14,000*40%)
October	$9,600 ($16,000*60%)	6,400 ($16,000*40%)
November		$10,800 ($18,000*60%)	$7,200 ($18,000*40%)
December			$12,000 ($20,000*60%)
Total cash payments	$15,200	$17,200	$19,200
Ending cash balance	$33,600	$60,000	$92,400

November (as minimum cash balance of $10,000 ($60,000-$50,000) is available after payment of loan.