Question
Aztec Company sells its product for $180 per unit. Its actual and projected sales follow. Units Dollars April (actual) 7,000 $1,260,000 May (actual) 3,200 576,000
Aztec Company sells its product for $180 per unit. Its actual and projected sales follow.
Units Dollars
April (actual) 7,000 $1,260,000
May (actual) 3,200 576,000
June (budgeted) 6,000 1,080,000
July (budgeted) 7,500 1,350,000
August (budgeted) 3,700 666,000
All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 25% in the second month after the sale, and 5% proves to be uncollectible. The products purchase price is $110 per unit. All purchases are payable within 12 days. Thus, 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 21% of the next months unit sales plus a safety stock of 70 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,632,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 14% interest rate. On May 31, the loan balance is $44,500, and the companys cash balance is $100,000. (Round final answers to the nearest whole dollar.)
1. 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.). Fill in the missing information in Part 1 and Part 2.
Cash Budget/Part 1
June and July
June July
Beginning cash balance | ? | ? |
Choose here: Addtl loan (loan repayment) or cash receipts from customers or Interest Expense or Payments on purchases or Selling & Admin Expenses |
? |
? |
Total cash available |
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Cash disbursements: |
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Choose here: Addtl loan (loan repayment) or cash receipts from customers or Interest Expense or Payments on purchases or Selling & Admin Expenses |
? |
? |
Choose here: Addtl loan (loan repayment) or cash receipts from customers or Interest Expense or Payments on purchases or Selling & Admin Expenses |
? |
? |
Choose here: Addtl loan (loan repayment) or cash receipts from customers or Interest Expense or Payments on purchases or Selling & Admin Expenses |
? |
? |
Choose here: Addtl loan (loan repayment) or cash receipts from customers or Interest Expense or Payments on purchases or Selling & Admin Expenses |
? |
? |
Total cash disbursements |
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Preliminary cash balance | ? | ? |
Choose here: Addtl loan (loan repayment) or cash receipts from customers or Interest Expense or Payments on purchases or Selling & Admin Expenses |
? |
? |
Ending cash balance |
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Loan Balance/Part 2
June July
Loan balance Beg. Of month | ? | ? |
Additional loan (loan repayment) | ? | ? |
Loan balance End of month |
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