Janus Products, Inc. is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter: a. Budgeted monthly absorption costing income statements for July to October are as follows: July $41,000 24,400 16,600 August $71,000 42,400 28,600 September $51,000 30,400 20,600 October $46,000 27,400 18,600 Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense Administrative expense* Total selling and administrative expenses Net operating income 7,500 5,700 13, 200 $ 3,400 11,900 7,300 19,200 8,600 6,200 14,800 7,400 6,00 13,40 $ 5,200 $ 9,400 $ 5,800 *Includes $2,050 depreciation each month. b. Sales are 20% for cash and 80% on credit. c. Credit sales are collected over a three-month period, with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totalled $31,000, and June sales totalled $37,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% are paid in the following month. Accounts payable for inventory purchases at June 30 total $12,200. e. The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $18,500. f. Land costing $4,550 will be purchased in July g. Dividends of $1,050 will be declared and paid in September. h. The cash balance on June 30 is $8,100; the company must maintain a cash balance of at least this amount at the end of each month. 1. The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter 3. Prepare a cash budget for July, August, and September and for the quarter in total. (Roundup "Borrowing" and "Repayments" answers to the nearest whole dollar amount. Any "Repayments" and "Interest" should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.) Answer is complete but not entirely correct. JANUS PRODUCTS, INC. Cash Budget For the Quarter Ended September 30 July August September Quarter $ 8,100 $ 9,010 X $ 8,520 X $ 8,100 37,160 48,760 60,600 146,520 45,260 57,770 69,120 154,620 Cash balance, beginning Add: Collections from sales Total cash available Deduct: Disbursements: Inventory purchases Selling expenses Administrative expenses Land 35,550 11.900 30,775 8,600 OOOOO 5.250 4.150 oooo 0 31,050 7,500 3,650 4,550 0 0 46,750 2,010 X 0 97,375 28,000 13,050 4,550 1,050 0 144,025 10,595 Dividends 1,050 0 0 0 52,700 44,575 25,595 X 520 Total disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest 8,000 X 000 0 7,000 X 0 0 0 7,000 0 0 15,000 X (15,000) X (15,000) X (370) X (370) X 0 0 (15,370) (370) 10,225 $ 10,225 Total financing Cash balance, ending 0 8,000 8,520 x $ 9,010