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Exercise 1. (15 Points). Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted:

Exercise 1. (15 Points).

Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted:

April

May

Sales .

$150,000

$157,500

Merchandise purchases

107,000

112,400

Operating expenses:

Payroll .

13,600

14,280

Advertising .

5,400

5,700

Rent .

2,500

2,500

Depreciation

7,500

7,500

End of April balances:

Cash .

30,000

Bank loan payable

26,000

Additional data:

(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000.

(2) Purchases are all on credit, with 40% paid in the month of purchase and 60% paid in the following month.

(3) Operating expenses are paid in the month they are incurred.

(4) A minimum cash balance of $25,000 is required at the end of each month.

(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made at the end of the month if the cash balance exceeds $25,000.

Prepare the company's cash budget for May. Show the ending loan balance at May 31.

Exercise 2. (15 Points).

Argenta, Inc. is preparing its master budget for the first quarter ending March 31. The following forecasted data relate to the first quarter:

Unit sales:

January ..

40,000

February

55,000

March

50,000

Unit sales price .

$25

Cost of goods sold per unit ...

$13

Expenses:

Commissions

10% of sales

Rent ..

$20,000/month

Advertising ..

15% of sales

Office salaries ..

$75,000/month

Depreciation .

$50,000/month

Interest ..

15% annually on a $250,000 note payable

Tax rate.

40%

Prepare a budgeted income statement for the first quarter.

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