Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 4,000 $ 600,000 May (actual) 1,800

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedAztec Company sells its product for $150 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 4,000 $ 600,000 May (actual) 1,800 270,000 June (budgeted) 5,000 750,000 July (budgeted) 4,000 749,000 August (budgeted) 3,600 540,000 All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The products purchase price is $110 per unit. 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 22% of the next months unit sales plus a safety stock of 75 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,980,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $140,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $140,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $45,000, and the companys cash balance is $140,000. Required: 1. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. 2. Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July. 3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month. 4. Prepare a schedule showing the computation of cash payments for product purchases for June and July. 5. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.

Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow. April (actual) May (actual) June (budgeted) July (budgeted) August (budgeted) Units 4,000 1,800 5,000 4,000 3,600 Dollars $ 600,000 270,000 750,000 749,000 540,000 Required 1 Required 2 Required 3 Required 4 Required 5 Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. Percent Collected in June April May July August Credit sales from: April May 42% 28% 42% June 28% 0% 0% 0% 0% 0% 0% 0% 0% 28% 42% 28% 0% 28% 0% 0% July 0% 0% 28% 42% 28% August Amount Collected in June Total April May July August Credit sales from: $ 0 $ April May of 0 June $ 600,000 270,000 750,000 600,000 540,000 T 0 $ 0 op of $ o p T July August Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Prepare a schedule that shows the computation of budgeted ending inventories in units) for April, May, June, and July. June July AZTEC COMPANY Budgeted Ending Inventory For April, May, June and July April May Next month's budgeted sales (units) 01 01 Ratio of inventory to future sales 0% 0% Budgeted "base" ending inventory op on Safety stock (units) 01 01 Budgeted ending inventory (units) - 0% 0% Required 1 Required 2 Required 3 Required 4 Required 5 Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and amount of purchases for each month. July AZTEC COMPANY Merchandise Purchases Budgets For May, June, and July May Budgeted unit sales for month 1,800 Budgeted ending inventory (units) 0 1,175 | Required units of available merchandise 2,975 Budgeted beginning inventory (units) (471) Budgeted purchases (units) 2,504 Budgeted cost per unit $ 110 $ Budgeted cost of merchandise purchases $ 275,440 $ 4,000 867 4,867 June 5,000 9 955 5,955 (1,175) 4,780 110 525,800 (995) 3,872 X 110 425,920 $ $ IncYull CUI Iyulicu IcYulicu u INCY Uitut Iyul cu u Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month. (Do not round intermediate calculations. Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar value.) July $ AZTEC COMPANY Cash Budget June and July June Beginning cash balance $ 140,000 Cash receipts from customers 491,400 Total cash available 631,400 Cash payments for: Purchases Selling and administrative expenses Interest expense Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance 0 01 o Loan balance June July Interest expense 0 Total cash payments 0 0 Preliminary cash balance Additional loan (loan repayment) Ending cash balance 01 0 $ Loan balance June July Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month AZTEC COMPANY Cash Budget June and July July Beginning cash balance June 140,000 491,400 Cash receipts from customers 600,320 X Total cash available 631,400 Cash payments for: Total cash payments Preliminary cash balance oo Ending cash balance $ 0 $ Loan balance June July Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Patricia A. Libby, Daniel Short, George Kanaan, Maureen Libby Gowing, Robert Libby

4th Canadian Edition

0070001499, 9780070001497

More Books

Students also viewed these Accounting questions

Question

Discuss the importance of identifying the acquisition date.

Answered: 1 week ago