| 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, 26% in the second month after the sale, and 4% proves to be uncollectible. The products purchase price is $110 per unit. All purchases are payable within 11 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 20% of the next months unit sales plus a safety stock of 80 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,932,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $150,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $150,000, 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 $33,500, and the companys cash balance is $150,000. (Round final answers to the nearest whole dollar.) | Required: | | 1. | 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. | 2. | Prepare a table 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 table showing the computation of cash payments on 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. (Do not round intermediate calculations.) | | | | | | | |
