Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. Sales units May (Actual) 3,000 Sales dollars $ 480,000 June (Budget) July (Budget) 5,000 4,000 $ 640,000 $ 800,000 August (Budget) 3,600 $ 576,000 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 24% of the next month's unit sales. The May 31 actual inventory level of 1,200 units is consistent with this policy. Selling and administrative expenses of $127,000 per month are paid in cash. The company's minimum cash balance at month-end is $130,000. Loans are obtained at the end of any month when the preliminary cash balance is below $130,000. Any preliminary cash balance above $130,000 is used to repay loans at month-end. This loan has a 1.0% monthly interest rate. On May 31, the loan balance is $39,000, and the company's cash balance is $130,000. 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 $382,800 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. Sales Cash receipts from: AZTEC COMPANY Schedule of Cash Receipts from Sales Collections of current period sales Collections of prior period sales Total cash receipts May June $ 480,000 $ 800,000 $ July 640,000 $ 192,000 69 $ 153,600 364,800 608,000 $ 556,800 EA $ 761,600 AZTEC COMPANY Merchandise Purchases Budgets Budgeted sales units June July 5,000 4.000 Add. Desired ending inventory Next period budgeted sales units 6,200 4.960 Ratio of inventory to future sale 24% 24% Desired ending inventory units 1.488 1.190 Desired ending inventory units 6.488 5,190 Less: Beginning inventory units Units to purchase Cost per unit Cost of merchandise purchases 1.200 960 5,288 4.230 $ 69 110 $ 110 $ 581,680 $ 465,300 AZTEC COMPANY Schedule of Cash Payments for Merchandise Purchases Merchandise purchases Cash payments for Current period purchases Prior period purchases May June July $ 382,800 Total cash payments for merch. purchases $ 69 0 $ 0 Beginning cash balance Total cash available Less: Cash payments for Total cash payments Preliminary cash balance Ending cash balance $ Loan balance June Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month O 0 0 $ 0 July