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DC Products is a wholesale distributor of industrial cleaning products. The company treasurer has assembled the following information to assist in preparing a detailed
DC Products is a wholesale distributor of industrial cleaning products. The company treasurer has assembled the following information to assist in preparing a detailed cash budget to support the company's loan application for short-term financing with a local bank: a. Budgeted sales and merchandise purchases for the year 2024, as well as actual sales and purchases for the last quarter of 2023, are as follows: Sales Merchandise Purchases Fourth-quarter actual 2023: 2024: First-quarter estimated Second-quarter estimated Third-quarter estimated Fourth-quarter estimated $ 460,000 $289,800 690,000 427,800 920,000 570,400 1,150,000 701,500 460,000 289,800 b. The company normally collects 65% of a quarter's sales before the quarter ends and another 33% in the following quarter. The remainder are uncollectible. This pattern of collections is now being experienced in the 2023 fourth-quarter actual data. c. 80% of a quarter's merchandise purchases are paid for within the quarter. The remainder are paid in the following quarter. d. Operating expenses for the year 2024 are budgeted quarterly at $115,000 plus 15% of sales. Of the fixed amount, $46,000 each quarter is depreciation. e. The company will pay $23,000 in dividends each quarter. f. Equipment purchases of $173,420 will be made in the second quarter, and purchases of $110,400 will be made in the third quarter. These purchases will be for cash. g. The cash account contained $23,000 at the end of 2023. The treasurer feels that this represents a minimum balance that must be maintained. h. Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter at an annual interest rate of 10%. Interest is paid only when the principal is repaid. All borrowings and all repayments of the principal must be in round $1,000 amounts. Interest payments can be in any amount. (Compute interest on whole months, e.g., 1/12, 2/12.) i. At present, the company has no loans outstanding. Required: 1. Prepare the following by quarter and in total for the year 2024:
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