The president of Univax, Inc has just approached the company's bank seeking short term financing for the coming year, Year 2. Univax is a distributor of commercial vaccum cleaners. The bank has stated that the loan request must be accompanied by a detailed cash budget that shows the quarters in which financing will be needed. as well as the amounts that will be needed an the quarters in which repayments can be made.

To provide this information for the bank, the president has directed that the following data be gathered from which a cash budget can be prepared.

A. Budgeted sales and merchandise purchases for Year 2, as well as actual sales and purchases for the last quarter of Year 1 are as follows:

	sales	merchandise purchases
year 1
4th quarter actual	300,000	180,000
Year 2
first quarter estimated	400,000	260,000
second quarter estimated	500,000	310,000
third quarter estimated	600,000	370,000
fourth quarter estimated	480,000	240,000

B. The company typically collects 33% of a quarter's sales before the quarter ends and another 65% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the actual data for the Year 1 fourth quarter.

C. Some 20% of a quarters merchandise purchases are paid for within the quarter. The remaider is paid in the following quarter.

D. Selling and admin. expenses for Year 2 are budgeted at $90,000 per quarter plus 12% of sales. Of the fixed amount $20,000 each quarter is depreciation.

E. The company will pay $10,000 in cash dividends each quarter

F. Land purchases will be made as follows during the year: 80,000 in the second quarter and 48,500 in the third quarter

G. The cash account contained $20,000 at the end of Year 1. The company must maintain a minimum cash balance of at least 18,000

H. The company has an agreement with a local ank that allows the company to borrow in increments of $10,000 at the beginning of each quarter, up to a total loan balance of $100,000. The interest rate on these loans are 1% per month and for simplicity, we will assume that the interest is not compounded. the company would as far as it is able, repay the loan plus accumulated interest at the end of the year.

I. At present, the company has no loans outstanding.

Solve

1. Prepare the followin, by quarter and in total for Year 2

A. A schedule of expeceted cash collections for sales

B. A scheduel of expeceted cash disbursements for merchandise purchases

2. Compute the expected cash disbursements for selling and admin. expenses, by quarter and in total for Year 2.

3. Prepare a cash budget by quarter and in total for Year 2.