The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $12,000 of the estimated monthly cost of goods sold and $8,000 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month.

Current assets as of April 1, 2013, consist of cash of $14,000 and accounts receivable of $149,800 ($105,000 from March credit sales and $44,800 from February credit sales). Current liabilities as of April 1 consist of $18,000 of accounts payable for product costs incurred in March; $4,600 of accrued liabilities foroperating expenses incurred in March; and a $40,000, 12%, 120-day note payable that is due on April 17, 2013. An estimated income tax payment of $40,000 will be made in May. The regular quarterly dividend of $16,000 is expected to be declared in May and paid in June. Capital expenditures amounting to $17,200 will be made in April. Required: a. Complete the monthly cash budgets for the second quarter of 2013 using the following format. Note that the ending cash balance for June is provided as a check figure.

\fACCOUNTING: What the Numbers Mean, 10e Chapter 14 Problem 14.22 Name: Enter Name General Spreadsheet Instructions: Step 1: Review General Spreadsheet Instructions Step 2: Complete the problem requirements by entering appropriate dollar amounts or formulas in "shaded" worksheet cells Review Problem 14.22 Worksheet Step 3: Complete Analysis Worksheet Step 4: Respond to "What the Numbers Mean" Worksheet ACCOUNTING: What the Numbers Mean, 10e Chapter 14 Problem 14.22 Name: Enter Name Problem Description: Presented below are the budgeted income statements for the second quarter of 2013 for SeaTech, Inc.: Sales Cost of goods sold * Gross profit Operating expenses ** Operating income April 140,000 96,000 $ 44,000 22,000 $ 22,000 $ $ $ $ May 170,000 114,000 56,000 25,000 31,000 June 190,000 126,000 $ 64,000 27,000 $ 37,000 $ * Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead). ** Includes all period costs (i.e., selling, general, and administrative expenses). The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% in the second month after sale. Depreciation, insurance, and property taxes represent $12,000 of the estimated monthly cost of goods sold, and $8,000 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance in the following month. Current assets as of April 1, 2013, consist of cash of $14,000 and accounts receivable of $149,800 ($105,000 from March credit sales and $44,800 from February credit sales). Current liabilities as of April 1 consist of: $18,000 of accounts payable for product costs incurred in March, $4,600 of accrued liabilities for operating expenses incurred in March, and a $40,000, 12%, 120-day note payable that is due on April 17, 2013. An estimated income tax payment of $40,000 will be made in May. The regular quarterly dividend of $16,000 is expected to be declared in May and paid in June. Capital expenditures amounting to $17,200 will be made in April. Instructions: Please proceed to the "Analysis" worksheet and complete the basic problem requirements. Complete the problem requirements by entering appropriate amounts or formulas in shaded worksheet cells: a. Complete the monthly cash budgets for the second quarter of 2013 using the format shown on the "Analysis" worksheet. Note that the ending cash balance for June is provided as a check figure. b. Assume that management of SeaTech, Inc., desires to maintain a minimum cash balance of $10,000 at the beginning of each month, and that a $50,000 line of credit has been arranged with a local bank at an interest rate of 10% to ensure the availability of funds. Borrowing transactions are to occur only at the end of the month in which the budgeted cash balance would otherwise fall short of the $10,000 minimum balance. Repayments of principle and interest are to occur at the end of the earliest month in which sufficient funds are expected to be available for repayment. Explain how this minimum cash balance requirement would affect the monthly cash budgets prepared in part a above. After completing the "Analysis" worksheet, please proceed to the "What the Numbers Mean" worksheet and respond to the additional requirements presented. ACCOUNTING: What the Numbers Mean, 10e Chapter 14 Problem 14.22 Name: Enter Name Complete the Modeling: Step 1: Analysis of cash receipts from sales: From Budgeted Income Statement Total Sales: % cash transactions: Total Cash Sales: April May June 0% March April 0% May June May June Total Credit Sales: Credit Sales % Collected February sales in accounts receivable: March sales: $ March sales: $ April sales: $ April sales: $ May sales: $ Total cash collections form credit sales: April $ - $ - $ - $ - Step 2: Analysis of cash payments for cost of goods sold and operating expenses: From Budgeted Income Statement Cost of goods sold: Operating expenses: Total cost of goods sold and operating expenses: Less items not paid in current month: Cash paid for cost of goods sold and operating expenses: Cash Purchases April 1, 2013 current liabilities: April cash purchases: April cash purchases: May cash purchases: May cash purchases: June cash purchases: Total cash payments: Cash Purchases May April $ - $ - $ - $ - $ - $ - % Paid Cash Payments May April $ $ $ $ $ $ June $ - June - $ - $ - a. Cash Budget SEATECH, INC. Cash Budget For the months of April, May, and June, 2013 April Beginning Cash Balance Cash Receipts: From cash sales made in current month From credit sales made in: February (from analysis in Step 1 above) March (from analysis in Step 1 above) April (from analysis in Step 1 above) May (from analysis in Step 1 above) Total Cash Available Cash Disbursements: For cost of goods sold/operating expenses incurred in: March (from analysis in Step 1 above) April (from analysis in Step 1 above) May (from analysis in Step 1 above) June (from analysis in Step 2 above) For payment of note payable and interest For capital expenditures For payment of income taxes For payment of dividends Total Disbursements Ending cash balance May - - - $ - $ - - - - $ $ June $ - - $ - $ $ - - $ $ - b. Cash Budget (revisions shown in bold) SEATECH, INC. Cash Budget For the months of April, May, and June, 2013 April Beginning Cash Balance Cash Receipts: From cash sales made in current month From credit sales made in: February (from analysis in Step 1 above) March (from analysis in Step 1 above) April (from analysis in Step 1 above) May (from analysis in Step 1 above) Total Cash Available Cash Disbursements: For cost of goods sold/operating expenses incurred in: March (from analysis in Step 1 above) April (from analysis in Step 1 above) May (from analysis in Step 1 above) June (from analysis in Step 2 above) For payment of note payable and interest For capital expenditures For payment of income taxes For payment of dividends Total Disbursements Excess (deficiency) of available cash over disbursements Borrowings Repayments Interest Ending Cash Balance May - - - $ - $ $ June - Same as cash budget in part a. $ - - $ - - - $ - $ - $ - $ - $ - $ - Same as cash budget in part a. ACCOUNTING: What the Numbers Mean, 10e Chapter 14 Problem 14.22 Name: Enter Name What does it mean? Question 1: How do revenues in the income statement differ from cash receipts in the cash budget for the same period of time? What does it mean? Question 2: How do expenses in the income statement differ from cash payments in the cash budget for the same period of time? What does it mean? Question 3: Explain how the minimum cash balance requirement in part b of the problem affects the monthly cash budgets prepared in part a of the problem. What does it mean? Question 4: Explain a cash management strategy that might require a minimum, as well as a maximum, cash balance of $10,000 at the end of each month