Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. Sales units Sales dollars May (Actual) June (Budget) July (Budget) 1,800 $ 288,000 5,500 $ 880,000 4,500 $ 720,000 August (Budget) 3,500 $ 560,000 All sales are on credit. Collections are as follows: 24% is collected in the month of the sale, and the remaining 76% 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 25% of the next month's unit sales. The May 31 actual inventory level of 1,375 units is consistent with this policy. Selling and administrative expenses of $136,000 per month are paid in cash. The company's minimum cash balance at month-end is $120,000. Loans are obtained at the end of any month when the preliminary cash balance is below $120,000. Any preliminary cash balance above $120,000 is used to repay loans at month-end. This loan has a 0.5% monthly interest rate. On May 31, the loan balance is $31,500, and the company's cash balance is $120,000. 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 $299,750. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Prepare a schedule of cash receipts from sales for each of the months of June and July. AZTEC COMPANY 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 $ 288,000 $ 880,000 $ 720,000 $ 211,200 $ 172,800 218,880 668,800 $ 430,080 $ 841,600 < Required 1 Required 2 > Required 1 Required 2 Required 3 Required 4 Prepare the merchandise purchases budget for June and July. AZTEC COMPANY Merchandise Purchases Budgets Budgeted sales units June July 5,500 4,500 Add: Desired ending inventory Next period budgeted sales units 4,500 3,500 Ratio of inventory to future sale 25% 25% Desired ending inventory units 1,125 875 Total required units 6,625 5,375 Less: Beginning inventory units 1,375 1,125 Units to purchase 5,250 4,250 Cost per unit $ 110 $ 110 Cost of merchandise purchases $ 577,500 $ 467,500 Required 1 Required 2 Required 3 Required 4 Prepare a schedule of cash payments for merchandise purchases for June and July. Assume May's budgeted merchandise purchases is $299,750. AZTEC COMPANY Schedule of Cash Payments for Merchandise Purchases Merchandise purchases Cash payments for Current period purchases Prior period purchases Total cash payments for merch. purchases May June July $ 299,750 $ 880,000 $ 363,000 S 363,000 S 0 AZTEC COMPANY Cash Budget Beginning cash balance Add: Cash receipts from sales Total cash available June and July June July $ 120,000 $ 120,000 430,080 841,600 550,080 961,600 Less: Cash payments for: Merchandise purchases (577,500) (467,500) Selling and administrative expenses (136,000) (136,000) Interest expense Total cash payments Preliminary cash balance (713,500) (603,500) Ending cash balance $ 0 $ 0 Loan balance June July Loan balance Beginning of month Additional loan (loan repayment) Loan balance - End of month