Problem 20-7AA 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. Unite Dollars April actual) 3,000 $450,000 May (actual) 2,000 420,000 June (budgeted) 4,500 675,000 Joly (budgeted) 3,500 674,000 August (budgeted 3.600 540,000 All sales are on credit. Recent experience shows that 30% of credit sales is collected in the month of the sale. 40% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible. The product's 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 25% of the next month's unit sales plus a safety stock of 155 units. The April 30 and May 31 actual Inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,680,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $110,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $110.000, 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 $46.000, and the company's cash balance is $110,000 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. Answer is not complete. Complete this question by entering your answers in the tabs below. Required: Required 2 Required 3 Required 4 Required 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 June April May July August 40% 30% Credit sales from April May June July August 26% 40% 30% 25% 40% 30% 3 26% 40% 30% Amount Collected in June Total April May July August Credits from April May June $ 450,000 420,000 675,000 525,000 540,000 $ 135,000 $ 180,000 S 117.000 120,000 168,000 $ 109,200 202,500 270,000 $ 175,500 202.2003 269,500 July August 162.000 607,100 $ 135.000 $ 306.000 $ 487,500 Is 581 400 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 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) 2,800 4,500 3,500 3,600 Ratio of inventory to futuro sales 25% 25% 25% 25% Budgeted "base" ending inventory 700 1.125 900 Safely stock (units) 155 155 155 155 Budgeted ending inventory (units) 855 1,280 1,030 1,055 875 010 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 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 Budgeted ending inventory (units) 1,280 1,030 1,055 Budgeted unit sales for month 2,800 4,500 3,500 Required units of available merchandise 4,080 5,530 4,555 Budgeted beginning inventory (units) 855 1,280 1,030 Budgeted purchases (units) 3,225 4,250 3,525 Budgeted cost per unit 110 110 $ Budgeted cost of merchandise purchases $ 354,750 $ 467,500 $ 387.750 lo O > $ $ 110 Prepare 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 40% 40% June 60% July 60% 40% Amount Paid in... June Total May July $ From purchases in: May June July $ 212,850 354,750 467,500 232,650 $ 141,900 280,500 187,000 232,650 $ 419,650 IS 212,850 $ 422,400 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 110,000 110,000 Cash receipts from customers 487,500 581,400 Total cash available 597,500 691,400 Cash payments for: Purchases 422,400 419,650 Selling and administrative expenses 140,000 140,000 Interest expense 498 1,315 $ $ ololo Total cash payments Preliminary cash balance Additional loan (loan repayment) Ending cash balance Loan balance 562,898 34,602 75,398 110,000 560,965 130,435 (10,435) 120,000 Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month June 46,000 75,398 121,398 July 121,398 (10,435) 110,963 $ $