Aztec Company sells its product for $190 per unit. Its actual and budgeted sales follow. April (actual) May (actual) June (budgeted) July (budgeted) August (budgeted) Units 5,500 3,600 7.000 7.500 4,200 Dollars $1,045,000 684,000 1.330.000 1.425.000 798,000 All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 29% in the second month after the sale, and 1% proves to be uncollectible. The product's 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 20% of the next month's unit sales plus a safety stock of 60 units. The April 30 and May 31 actual Inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,656,000 and are paid evenly throughout the year in cash. The company's 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 11% interest rate. On May 31, the loan balance is $33,000, and the company's cash balance is $100,000. Required: 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 2. Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April May June, and July. 3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month. 4. Prepare a schedule showing the computation of cash payments for product purchases for June and July 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. Required 1 Required 2 Required 3 Required 4 Required 5 Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July. AZTEC COMPANY Budgeted Ending Inventory For April, May, June and July April May Next month's budgeted sales (units) 5,500 3,600 Ratio of inventory to future sales 20% 20% Budgeted "base" ending inventory 5,500 1,460 June 7,000 20% 1,560 July 7,500 20% 900 Required 1 Required 2 Required 3 Required 4 Required 5 Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month. AZTEC COMPANY Merchandise Purchases Budgets For May, June, and July May June July Required units of available merchandise Budgeted purchases (units) Budgeted cost of merchandise purchases $ AZTEC COMPANY Cash Budget June and July June Beginning cash balance 100,000 Cash receipts from customers 704,178 Total cash available 804,178 Cash payments for Additional loan (loan repayment) x 656,920 138,000 July 100,000 977,436 X 1,077,436 763,840 138,000 Total cash payments Preliminary cash balance 794,920 9,258 33,000 X 42,258 901,840 175,596 123,742 X 51,854 Ending cash balance $ Loan balance June July Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month 123,742 $ 123,742