P9-62A Combined cash budget and a budgeted balance sheet (Learning Objective 3)

Hugo Medical Supply has applied for a loan. Pacific Commerce Bank has requested a budgeted balance sheet as of April 30 and a combined cash budget for April. As Hugo Medical Supplys controller, you have assembled the following information:

March 31 equipment balance, $52,600; accumulated depreciation, $41,300

April capital expenditures of $42,400 budgeted for cash purchase of equipment

April depreciation expense, $700

Cost of goods sold, 60% of sales

Other April operating expenses, including income tax, total $14,200, 35% of which will be paid in cash and the remainder accrued at April 30

March 31 owners equity, $92,600

March 31 cash balance, $40,300

April budgeted sales, $90,000, 70% of which is for cash. Of the remaining 30%, half will be collected in April and half in May.

April cash collections on March sales, $29,100

April cash payments of March 31 liabilities incurred for March purchases of inventory, $17,300

March 31 inventory balance, $29,200

April purchases of inventory, $10,700 for cash and $36,300 on credit. Half of the credit purchases will be paid in April and half in May.

Requirements Prepare the budgeted balance sheet for Hugo Medical Supply at April 30. Show separate computations for cash, inventory, and owners equity balances.

Prepare the combined cash budget for April.

Suppose Hugo Medical Supply has become aware of more efficient (and more expensive) equipment than it budgeted for purchase in April. What is the total amount of cash available for equipment purchases in April, before financing, if the minimum desired ending cash balance is $14,000? (For this requirement, disregard the $42,400 initially budgeted for equipment purchases.)

Before granting a loan to Hugo Medical Supply, Pacific Commerce Bank asks for a sensitivity analysis assuming that April sales are only $60,000 rather than the $90,000 originally budgeted. (While the cost of goods sold will change, assume that purchases, depreciation, and the other operating expenses will remain the same as in the earlier requirements.)

Prepare a revised budgeted balance sheet for Hugo Medical Supply, showing separate computations for cash, inventory, and owners equity balances.

Suppose Hugo Medical Supply has a minimum desired cash balance of $25,000. Will the company need to borrow cash in April?