Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ZYX Corporation is preparing a cash budget for January of the coming year. The following data have been forecasted: January February Sales 750,000 800,000 Purchases

ZYX Corporation is preparing a cash budget for January of the coming year. The following data have been forecasted:

January February
Sales 750,000 800,000
Purchases 450,000 480,000

Operating expenses

Payroll 146,800 167,000
Advertising 52,700 62,800
Rent 8,750 8,750
Depreciation 23,750 23,750

End-of-December balances

Cash 120,000

Accounts payable

250,000
Bank loan 480,000

Sales are 40% cash. The term of credit sales is 2/10, n/30.

The collection pattern for credit sales is 75% in the month following the month of sale (of which 80% are collected within 10 days), and 23% in the month thereafter. The remaining credit sales are considered as uncollectible.

The accounts receivable balance on January 1 is $1,000,000, of which $ 700,000 represents uncollected December sales and $300,000 represents uncollected November sales.

Purchases are all on credit, with 40% paid in the month of purchase and the balance the following month.

Operating expenses are paid in the month incurred.

Starting from January, the firm desires to maintain a minimum cash balance of $150,000 at the end of each month. 6% APR loans are used to maintain the minimum cash balance.

At the end of each month, monthly interest is paid on the outstanding loan balance as of the beginning of the month. Repayments are made (at the end of the month) whenever the cash balance exceeds $150,000.

Required:

What is the amount of cash inflow from operations, what is the amount of cash outflow from operations, and what is the amount of loan balance at the end of January after loan repayments, if any?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial And Managerial Accounting The Basis For Business Decisions

Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello

19th Edition

1260247937, 978-1260247930

More Books

Students also viewed these Accounting questions

Question

=+ What does the usage of these products abroad look like?

Answered: 1 week ago