17 Cash receipts, disbursements and - summary budgets Los s Hats manufactures and distributes hats for every Hailey inable occasion. Henrietta Hailey started the company in her three years ago and has been surprised at her success. She dering an expansion of her business and needs to prepare cash budgeting information for presentation to Second National Bank to secure a loan. Henrietta is not an accountant, so she has house asked you to help her with preparing the necessary reports Hailey's Hats began the month with a bank balance of $10000 The budgeted sales for March to June are as follows: March AprilMayJune $14000 $16500 $15500 $17 500 Cash sales Sales on account 29000 30000 40000 50000 Total sales $43000 $46500 $55500 $67500 Henrietta has found that she generally collects payment for credit sales over a two-month period. Typically, 70 per cent is collected in the month of sale and the remainder is collected in the next month. Her policy is to purchase inventory each month equivalent to 60 per cent of that month's budgeted sales. She inks this provides her sufficient inventory levels to manage ticipated changes in demand. Hailey's Hats pays for ventory purchases in the month following purchase. Selling administrative expenses are budgeted to be 30 per cent of h month's sales. One-half of the selling and administrative enses is accounted for by depreciation on Henriettas manufacturing equipment. The company purchased additional manufacturing equipment in April at a cost of $24000. Henrietta ioe s not receive a salary, but she does pay herself dividends as company performance allows. The first quarter of the year was ery profitable, so Henrietta paid herself a dividend of $12500 in April. Henrietta wants to maintain a minimum cash balance of $10000 and has established a line of credit so she can borrow enough money to make up any shortfall. If the company has excess cash on hand at the end of a month (in excess of $10000) the line of credit will be paid back. Interest on the line of credit will not be paid until the end of the year. (Ignore any interest ments that the company would make on their borrowings.)