Need help with May and June Beginning cash balance with work/explanation, please.
The president of the retailer Prime Products has just approached the company's bank with a request for a $69,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months April through June, during which the loan will be used: a. On April 1, the start of the loan period, the cash balance will be $22,200. Accounts receivable on April 1 will total $176,400, of which $151,200 will be collected during April and $20,160 will be collected during May. The remainder will be uncollectible. b. Past experience shows that 30% of a month's sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the three-month period follow: Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April May June $ 438,000 $ 480,000 $261,000 $ 291,000 $183,500 $ 136,500 $ 27,400 $ 27,400 26, 100 $ 28,600 $ 28,600 $ 28,600 70,800 $ 70, 800 75,460 67,500 $ 19,000 $ 19,000 $ 19,000 C. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $180,500. d. In preparing the cash budget, assume that the $69,000 loan will be made in April and repaid in June. Interest on the loan will total $1,040. Required: 1. Calculate the expected cash collections for April, May, and June, and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period. Prepare a cash budget, by month and in total, for the three-month period. (Cash deficiency, repayments and interest should I indicated by a minus sign.) Prime Products Cash Budget April May June Quarter $ 22,200 $ 22,200 401,340 Beginning cash balance Add receipts: Collections from customers Total cash available Less cash disbursements: Merchandise purchases Payroll 282,600 304,800 426,960 426,960 1,110,900 1,133,100 401,340 180,500 27,400 28,600 291,000 27,400 28,600 70,800 183,500 26,100 28,600 Lease payments 655,000 80,900 85,800 217,060 67,500 1,106,260 70,800 75,460 67,500 381,160 20,180 307,300 417,800 9,160 (2,500) 26,840 Advertising Equipment purchases Total cash disbursements Excess (deficiency) of cash available over disbursements Financing: Borrowings Repayments Interest Total financing Ending cash balance 69,000 69,000 (69,000) (1,040) (70,040) (49,860) (69,000) (1,040) (1,040) 25,800 69,000 $ 66,500 $ 9,160 $ $
