Olson Construction Company builds houses. It has completed two houses: the first priced at $95,000, and the second at $120,000. Olson pays the realtor 8% of the selling price when the house is sold. Two additional houses are under construction. Brunhilde Olson, the owner, estimates that in May, the company will pay $20,000 to workers,

$42,000 for direct materials, and $60,000 to other companies for work she has subcontracted. The bank will make a construction loan to Olson Construction of $50,000 at 18% per year on May | if the company needs it. Interest would be paid at the end of each month on that loan. If this loan is not made, the company will not be able to borrow cash until June 15. Brunhilde also wants to avoid having too much cash on hand.

She has adopted a policy of investing “excess” cash in a 30-day certificate of deposit at the end of any month when the anticipated ending cash balance from operations exceeds $60,000, so that the ending cash balance is reduced to exactly $60,000. On April 30, Olson Construction Company has $25,000 cash on hand.

Required: (1) Prepare a cash budget for May, assuming that Olson Construction expects to sell only the $95,000 house.

(2) Prepare a cash budget for May, assuming that Olson Construction expects to sell both houses. lpo8