Required: 1. Prepare a schedule of expected cash collections for April, May, and June and for the three months in total. Schedule of Expected Cash Collections April May June From accounts receivable: | $ 131,500 $ 5,300 From April sales 37,620 146,520 79,200 From May sales 58,520 227,920 From June sales 64,220 Total cash collections $ 169,120 $ 210,340 $ 371,340 Quarter $ 136,800 263,340 286,440 64,220 $ 750,800 Jodi Horton, president of the retailer Crestline Products, has just approached the company's bank with a request for a $32,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories in support of peak April sales. 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-June, during which the loan will be used: a. On April 1, the start of the loan period, the cash balance will be $27,000. Accounts receivable on April 1 will total $139,000, of which $131,500 will be collected during April and $5,300 will be collected during May. The remainder will be uncollectible. b. Past experience shows that 19% of a month's sales are collected in the month of sale, 74% in the month following sale, and 4% in the second month following sale. The other 3% represents 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 $ 198,000 $ 308,000 $338,000 $ 120,400 $170,400 $ 150,400 $ 9,500 $ 9,500 $ 8,500 $ 14,500 $ 14,500 $ 14,500 $ 71,800 $ 74,400 $ 57,300 $ 8,800 $ 10,100 $ 10,100 $ 10,100 C. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on March 31, which will be paid during April, total $108,300. d. In preparing the cash budget, assume that the $32,000 loan will be made in April and repaid in June. Interest on the loan will total $870. Cash Budget April | $ 27,000 May May June June Quarter Quarter Cash balance, beginning Add receipts: Collections from customers Total available Less disbursements: Merchandise purchases Payroll Lease payments Advertising Equipment purchases Total disbursements Excess (deficiency) of receipts over disbursements Financing: L L Borrowings Repayments Interest Total financing Cash balance, ending e, ending