Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow.

	Units	Dollars
April (actual)	5,000	$	800,000
May (actual)	2,000		320,000
June (budgeted)	5,500		880,000
July (budgeted)	4,500		879,000
August (budgeted)	4,000		640,000

All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 26% in the second month after the sale, and 4% 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 24% of the next months unit sales plus a safety stock of 95 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,440,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $110,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $110,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 11% interest rate. On May 31, the loan balance is $44,500, and the companys cash balance is $110,000.

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.

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
		April	May	June	July	August
Credit sales from:
April		26%	44%	26%
May			26%	44%	26%
June				26%	44%	26%
July					26%	44%
August						26%
		Amount Collected in
	Total	April	May	June	July	August
Credit sales from:
April	$800,000
May	320,000
June	880,000
July	720,000
August	640,000

• Required 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
Cash Budget
June and July
	June	July
Beginning cash balance	$110,000	$110,000
Cash receipts from customers	577,600	698,940
Total cash available	687,600	808,940
Cash payments for:
Purchases	472,120	520,520
Selling and administrative expenses	120,000	120,000
Interest expense	408	45
Interest expense
Total cash payments	592,528	640,565
Preliminary cash balance	95,072	167,875
Additional loan (loan repayment)	14,928	(57,875)
Ending cash balance	$110,000	$110,000
Loan balance
	June	July
Loan balance - Beginning of month	$44,500	$59,428
Additional loan (loan repayment)	14,928	(57,875)
Loan balance - End of month	$59,428	$1,553