Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. May (Actual) June (Budget) July (Budget) August (Budget) Sales units Sales dollars 2,800 $ 448,000 5,500 $ 880,000 4,500 $ 720,000 3,600 $ 576,000 All sales are on credit. Collections are as follows: 28% is collected in the month of the sale, and the remaining 72% is collected in the month following the sale. Merchandise purchases cost $110 per unit. For those purchases, 60% is paid in the month of purchase and the other 40% is paid in the month following purchase. The company has a policy to maintain an ending monthly inventory of 24% of the next month's unit sales. The May 31 actual inventory level of 1,320 units is consistent with this policy. Selling and administrative expenses of $154,000 per month are paid in cash. The company's minimum cash balance at month-end is $140,000. Loans are obtained at the end of any month when the preliminary cash balance is below $140,000. Any preliminary cash balance above $140,000 is used to repay loans at month-end. This loan has a 1.5 % monthly interest rate. On May 31, the loan balance is $46,500, and the company's cash balance is $140,000. Required: 1. Prepare a schedule of cash receipts from sales for each of the months of June and July. 2. Prepare the merchandise purchases budget for June and July. 3. Prepare a schedule of cash payments for merchandise purchases for June and July. Assume May's budgeted merchandise purchases is $379,280. 4. 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. Schedule of Cash Receipts from Sales Sales Cash receipts from: Collections of current period sales Collections of prior period sales Total cash receipts May June July $ 448,000 $ 880,000 $ 720,000 Required 1 $ 0 $ 0 Required 2 Merchandise Purchases Budgets Budgeted sales units Next period budgeted sales units Ratio of inventory to future sale Desired ending inventory units June 5,500 July 4,500 5,500 4,500 Units to purchase Cost per unit Cost of merchandise purchases 5,500 4,500 $ 110 $ 110 $ 605,000 $ 495,000 < Required 1 Required 3 > Schedule of Cash Payments for Merchandise Purchases. Merchandise purchases Cash payments for Current period purchases May June July Prior period purchases Total cash payments for merch. purchases $ 0 $ 0 < Required 2 Required 4 > Drov 5 of 6 Next Beginning cash balance Total cash available Less: Cash payments for: Total cash payments Preliminary cash balance Cash Budget June and July June July Ending cash balance Loan balance June Loan balance-Beginning of month Additional loan (loan repayment) Loan balance- End of month 0 0 $ 0 July < Required 3 Required 4