The president of the retailer Prime 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. 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: a. On April 1, the start of the loan period, the cash balance will be $33,600. Accounts receivable on April 1 will total $142,800, of which $122,400 will be collected during April and $16,320 will be collected during May. The remainder will be uncollectible. b. Past experience shows that 30% of a month's 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: Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April May June $366,000 $634,000 $340,000 $285,000 $203,000 $171,500 $ 21,000 $ 21,000 $ 34,900 $ 35,000 $ 35,000 $ 35,000 $ 71,000 $ 71,000 $ 67,200 $ 89,500 $ 22,000 $ 22,000 $ 22,000 c. 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 $153,500. 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 $800. Required: 1. Calculate the expected cash collections for April, May, and June, and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period. Required: 1. Calculate the expected cash collections for April, May, and June, and for the three months in total. 2. Prepare a cash budget, by month and in total, for the three-month period. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a cash budget, by month and in total, for the three-month period. (Cash deficiency, repayments and interest should be indicated by a minus sign.) May 109,900 $ June Quarter 161,300 $ 33,600 463,400 573,300 385,000 546,300 1,173,200 1,206,800 Prime Products Cash Budget April Beginning cash balance $ 33,600 $ Add receipts: Collections from customers 324,800 Total cash available 358,400 Less cash disbursements: Merchandise purchases 153,500 Payroll 21,000 Lease payments 35,000 Advertising 71,000 Equipment purchases Total cash disbursements 280,500 Excess (deficiency) of cash available over disbursements 77,900 Financing: Borrowings 32,000 Repayments Interest Total financing 32,000 Ending cash balance $ 109,900 $ 285,000 21,000 35,000 71,000 203,000 34,900 35,000 67,200 89,500 429,600 116,700 641,500 76,900 10,500 209,200 89,500 1,027,600 179,200 412,000 161,300 32,000 (32,000) (800) (32,800) 83,900 $ 32,000 211,200 161,300 $
