5. (55 Points) 31. It sells a single product for $25 a unit. Budgeted sales are 40% cash and credit sal months follow: Hammerly Corporation is preparing its master budget for the quarter ending March es are collected in the month following the sales. Budgeted sales for the next four 60% on credit. All January FebruaryMarch 1,200 ales in Units 1,000 1,000 1,400 the balance in accounts receivable is $10,000, which represents the uncollected nventory equal to30% of the next At December 31, portion of December sales. The company desires merchandise i month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is S10 per unit. All purchases are on account; 40% of the purchases are paid in the month of purchaseand 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases. Operating expenses are paid in the month incurred and consist of: . Sales commissions (10% of sales) . Freight (2% of sales) Office salaries ($2,400 per month) Rent ($4,800 per month) Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month (The interest payment is rounded to the nearest whole dollar). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At December 31, the loan balance is $0. Prepare a Cash budget for the quarter ended March 31, including information on the loan balance. Answer: Cash budget: Beginning balance Cash receipts Total available (A) Payments for purchases Selling and admin. expense Interest expense( rounded) Total cash disbursements (B) Preliminary cash balance (C) Loan activity Additional loan from bank (D) Repayment of loan to bank (D) Ending cash balance (E) Loan balance: Beginning New loarn Repayment Ending loan balance