Cash Budget with Supporting Schedules

The president of Giles, Inc. has been in conversations regarding financing for the coming year, 20X9. Giles, Inc. is a distributor of hair care products. The bank has stated that the loan request must be accompanied by a cash budget that shows the quarters in which financing will be needed as well as the amounts that will be needed and the quarters in which repayments can be made.

To meet the bank's requirements, the president has ordered that the following data be gathered from which a cash budget can be prepared:

Budgeted sales and merchandise purchases for Year 20X9, as well as actual sales and purchases from the last quarter of Year 20X8 are as follows:

	Sales	Merchandise Purchases
Year 20X8
Fourth Quarter Sales	$350,000	$200,000
Year 20X9
First Quarter (Estimated)	$420,000	$270,000
Second Quarter (Estimated)	$520,000	$320,000
Third Quarter (Estimated)	$630,000	$380,00
Fourth Quarter (Estimated)	$500,000	$260,000

1. The company usually collects 33% of a quarter's sales before the quarter ends and another 65% in the following quarter. The remainder is uncollectible. This period of collection is being experienced in the actual data for the Year 20X8 fourth quarter.
2. The company pays 20% of the merchandise within the quarter. The remainder is paid in the following quarter.
3. Selling and administrative expenses for Year 20X9 are budgeted at $ 95,000 per quarter plus 15% of sales. Of this amount, $ 25,000 each quarter is depreciation.
4. The company will pay $ 10,000 in cash dividends each quarter.
5. Land acquisitions (paid for in cash) will be made as follows during the year: $ 85,000 in the second quarter and $ 51,000 in the third quarter.
6. The Cash account had a balance of $25,000 at the end of Year 20X8. The company must maintain a minimum cash balance of $ 22,000.
7. The company has an agreement with a local bank that allows the company to borrow in increments of $ 10,000 at the beginning of each quarter, up to a total loan balance of $120,000. The interest rate on these loans is 1% per month (we will assume that the interest is not compounded). The company, if they are able, will repay the loan plus accumulated interest at the end of the year.
8. At the present time, the company has no loans outstanding.

Assignment Details

Important!

It is expected that the assignment will be completed using an Excel spreadsheet using formulas.

1. Prepare the following, by quarter and in total, for Year 20X9:

1. A schedule of expected cash collections on sales.
2. A schedule of expected cash disbursements for merchandise purchases.

2. Compute the expected cash disbursements for selling and administrative expenses, by quarter and in total, for the Year 20X9.
3. Prepare a cash budget by quarter and in total for Year 20X9.