Kegglers Supply is a merchandiser of three different products. The companys February 28 inventories are footwear, 19,500 units; sports equipment, 81,500 units; and apparel, 49,000 units. Management believes each of these inventories is too high. As a result, a new policy dictates that ending inventory in any month should equal 29% of the expected unit sales for the following month. Expected sales in units for March, April, May, and June follow.

	Budgeted Sales in Units
	March	April	May	June
Footwear	14,500	25,500	30,500	33,500
Sports equipment	68,500	91,000	94,500	90,500
Apparel	40,500	38,000	33,500	24,000

Required: 1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.

Problem 22-6AA Merchandising: Preparation of cash budgets (for three periods) LO P4

During the last week of August, Oneida Companys owner approaches the bank for a $106,500 loan to be made on September 2 and repaid on November 30 with annual interest of 17%, for an interest cost of $4,526. The owner plans to increase the stores inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The banks loan officer needs more information about Oneidas ability to repay the loan and asks the owner to forecast the stores November 30 cash position. On September 1, Oneida is expected to have a $4,000 cash balance, $154,000 of net accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.

Budgeted Figures*	September		October		November
Sales	$	240,000	$	475,000	$	450,000
Merchandise purchases		225,000		210,000		198,000
Cash payments
Payroll		19,600		22,000		23,600
Rent		8,000		8,000		8,000
Other cash expenses		35,000		31,000		20,150
Repayment of bank loan						106,500
Interest on the bank loan						4,526

*Operations began in August; August sales were $200,000 and purchases were $120,000. The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 23% of credit sales is collected in the month of the sale, 47% in the month following the sale, 19% in the second month, 7% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $94,000 of the $200,000 will be collected in September, $38,000 in October, and $14,000 in November. All merchandise is purchased on credit; 70% of the balance is paid in the month following a purchase, and the remaining 30% is paid in the second month. For example, of the $120,000 August purchases, $84,000 will be paid in September and $36,000 in October. Required: Prepare a cash budget for September, October, and November. (Round your final answers to the nearest whole dollar.)

Problem 22-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4

Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow.

	Units	Dollars
April (actual)	3,000	$	450,000
May (actual)	3,000		450,000
June (budgeted)	5,500		825,000
July (budgeted)	4,500		824,000
August (budgeted)	4,100		615,000

All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 29% in the second month after the sale, and 1% proves to be uncollectible. The products purchase price is $110 per unit. 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 24% of the next months unit sales plus a safety stock of 95 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,920,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $140,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $140,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $42,500, and the companys cash balance is $140,000. Required: 1. Prepare a schedule 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 schedule 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 schedule showing the computation of cash payments for 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.

Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.

		Percent Collected in
		April	May	June	July	August
Credit sales from:
April
May
June
July
August
		Amount Collected in
	Total	April	May	June	July	August
Credit sales from:
April	$450,000
May	450,000
June	825,000
July	675,000
August	615,000

Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.

AZTEC COMPANY
Budgeted Ending Inventory
For April, May, June and July
	April	May	June	July
Next month's budgeted sales (units)
Ratio of inventory to future sales
Budgeted "base" ending inventory

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.

AZTEC COMPANY
Merchandise Purchases Budgets
For May, June, and July
	May	June	July
Required units of available merchandise
Budgeted purchases (units)
Budgeted cost of merchandise purchases

repare a schedule showing the computation of cash payments for product purchases for June and July.

Cash payments on product purchases (for June and July)
		------------------ Percent Paid in---------------
		May	June	July
From purchases in:
May
June
July
		------------------ Amount Paid in---------------
	Total	May	June	July
From purchases in:
May
June
July

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. Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar value.)

AZTEC COMPANY
Cash Budget
June and July
	June	July
Beginning cash balance
Total cash available
Cash payments for:
Total cash payments	0	0
Preliminary cash balance
Ending cash balance	$0	$0
Loan balance
	June	July
Loan balance - Beginning of month
Additional loan (loan repayment)
Loan balance - End of month