The president of the retailer Prime Products has just approached the company's bank with a request for a $49,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. 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 through June, during which the loan will be used:

On April 1, the start of the loan period, the cash balance will be $38,500. Accounts receivable on April 1 will total $148,400, of which $127,200 will be collected during April and $16,960 will be collected during May. The remainder will be uncollectible.

Past experience shows that 30% of a months sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the three-month period follow:

	April	May	June
Sales (all on account)	$ 480,000	$ 450,000	$ 327,000
Merchandise purchases	$ 315,000	$ 183,000	$ 163,000
Payroll	$ 21,400	$ 21,400	$ 19,800
Lease payments	$ 34,200	$ 34,200	$ 34,200
Advertising	$ 74,600	$ 74,600	$ 65,800
Equipment purchases			$ 75,000
Depreciation	$ 16,200	$ 16,200	$ 16,200

Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid in April, total $186,000.

In preparing the cash budget, assume that the $49,000 loan will be made in April and repaid in June. Interest on the loan will total $840.

Required:

Calculate the expected cash collections for April, May, and June, and for the three months in total.

Prepare a cash budget, by month and in total, for the three-month period.

Prime Products
Cash Budget
	April	May	June	Quarter
Beginning cash balance	not attempted	not attempted	not attempted	not attempted
Add receipts:
Collections from customers	not attempted	not attempted	not attempted	not attempted
Total cash available	0	0	0	0
Less cash disbursements:
Merchandise purchases	not attempted	not attempted	not attempted	not attempted
Payroll	not attempted	not attempted	not attempted	not attempted
Lease payments	not attempted	not attempted	not attempted	not attempted
Advertising	not attempted	not attempted	not attempted	not attempted
Equipment purchases	not attempted	not attempted	not attempted	not attempted
Total cash disbursements	0	0	0	0
Excess (deficiency) of cash available over disbursements	0	0	0	0
Financing:
Borrowings	not attempted	not attempted	not attempted	not attempted
Repayments	not attempted	not attempted	not attempted	not attempted
Interest	not attempted	not attempted	not attempted	not attempted
Total financing	0		0	0
Ending cash balance	$0	$0	$0	$0