Transcribed image text: Operating Expenses and Cash Payments Operating expenses and other cash payments for the company during the quarter include the following. ALBENIZ CORPORATION BUDGETED OPERATING EXPENSES AND OTHER CASH PAYMENTS FOR FIRST QUARTER OF 20X6 (a) Sales commissions are paid to salesmen in the amount of 5% of sales. Sales commissions are paid in the month following the sale. (b) Salaries and wages are $55,000 per month. (c) Rent expense is $4,500 per month. (d) Office supplies are estimated at 2% of sales each month, paid for in the month of purchase. @) Depreciation on office equipment and furniture is $3,000 per month. (0) Other cash operating expenses are 3% of sales each month and are paid for in the month they are incurred. The company intends to purchase new equipment and furniture in January for $5,000 and in March for $1,500. (h) The company has a payment on its bank loans coming due in February in the amount of $5,000 for principal and $500 for interest. REQUIRED: (1) Prepare a cash budget by month and in total for the first quarter of 20X6 based upon the above information. Show all appropriate computations to support your amounts. Assume the company's cash balance on January 1, 20x6 is $5,000. If the company wishes to maintain a $5,000 minimum cash balance per month, during which months would the company have to borrow money? How much would they have to borrow during those months? (2) Problem 1 (30 points). Albeniz Corporation sells personal CD players. It has had problems in the past with cash flow and has decided to prepare a cash budget for the upcoming calendar year of 20X6. The company has gathered information that it feels will be pertinent in preparing a cash budget for the first quarter of 20X6. This information is provided below. Sales The company is budgeting the following sales for the first four months of 20X6: January, S400,000; February, S500,000; March. S550,000; and April. 3625,000. The company averages 30% cash sales, with the remaining sales on account. The company collects its sales on account in the following manner: 30% in the month of sale, 45% in the month following sale, and 22% in the second month following sale. The remaining 3% represents bad debts that are uncollectible. The expense for bad debts is recorded in the month of sale. The company's actual sales for the last three months of 20X5 were as follows: October, S475,000; November, S425,000; and December, S450,000. Purchases Purchases cost 70% of the sales price charged by the company. Purchases are made in the month prior to the month of sale. This means that the company will purchase in December the goods that it expects to sell in January. The goods will be paid for in the following manner: 60% in the month of purchase and the remaining 40% in the month following purchase