Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Cash disbursements:

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

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

Loan Balance/Part 2

June July

Loan balance Beg. Of month

?

?

Additional loan (loan repayment)

?

?

Loan balance End of month

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Financial Diet A Total Beginners Guide To Getting Good With Money

Authors: Chelsea Fagan, Lauren Ver Hage

1st Edition

1250176166, 978-1250176165

More Books

Students also viewed these Finance questions

Question

Guidelines for Informative Speeches?

Answered: 1 week ago