Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 22-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4 Aztec Company sells its product for $160 per

image text in transcribedimage text in transcribedimage text in transcribed

Problem 22-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4 Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. April (actual) May (actual) June (budgeted) July (budgeted) August (budgeted) Units 4,000 2,400 5,500 4,500 3,900 Dollars $ 640,000 384,000 880,000 879,000 624,000 All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 25% in the second month after the sale, and 5% 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 19% 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 $1,752,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 11% interest rate. On May 31, the loan balance is $42,000, and the company's cash balance is $100,000. 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. AZTEC COMPANY Cash Budget June and July June July Beginning cash balance Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance June July Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

Prepare an electronic rsum.

Answered: 1 week ago

Question

Strengthen your personal presence.

Answered: 1 week ago

Question

Identify the steps to follow in preparing an oral presentation.

Answered: 1 week ago