Aztec Company sells its product for $190 per unit. Its actual and budgeted sales follow.

Units Dollars April (actual) 8,000 $1,520,000 May (actual) 2,600 494,000 June (budgeted) 7,500 1,425,000 July (budgeted) 8,000 1,520,000 August (budgeted) 4,000 760,000

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, 27% in the second month after the sale, and 3% 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 180 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,836,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $120,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $120,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $40,500, and the companys cash balance is $120,000.

- Prepare a table 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
May
June
July
August

Amount Collected In:

				April	May	June	July	August
		Credit Sales:
		April	$1,520,000
		May	494,000
		June	1,425,000
		July	1,520,000
		August	760,000

B. Prepare a table 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, July

	April	May	June	July
Next month's budgeted sales (units)
Ratio Inventory to future sales (percent)
Budgeted "base" ending inventory

c. 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, July

	May	June	July
Required units of available
Budgeted purchases (units)
Budgeted cost of merchandise purchases

d. Prepare a table showing the computation of cash payments on product purchases for June and July.

Cash payments on product purchases for June and July

		-----	Percent Paid In	-------
	Total	May	June	July
From purchases In:
May
June
July

		----	Amount Paid In	----
	Total	May	June	July
From purchases in:
May
June
July

e. 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. Negative balances and Loan repayment amounts (if any) should be indicated with minus signs.)

AZTEC COMPANY

CASH BUDGET

JUNE AND JULY

	JUNE	JULY
Beginning cash budget
TOTAL CASH AVAILABLE
Cash Disbursements
Total Cash Disbursements
Preliminary cash balance

ENDING CASH BALANCE:

June:

July:

	LOAN BALANCE
	June	July
Loan Balance (Begininning of month)
Additional Loan (loan payment)
Loan Balance (End of Month)