a. On April 1, the start of the loan period, the cash balance will be $18,800. Accounts receivable on April 1 will total $165,200, of which $141,600 will be collected during April and $18,880 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 $ 334,000 $510,000 $343,000 $266,000 $200,000 $176,500 $ 19,000 $ 19,000 $ 18,800 $ 27,800 $ 27,800 $ 27,800 $ 70,400 $ 70,400 $ 57,890 $ 105,500 $23,000 $ 23,000 $ 23,000 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 $149,000. d. In preparing the cash budget, assume that the $83,000 loan will be made in April and repaid in June. Interest on the loan will total $1,180. 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.
a. On April 1, the start of the loan period, the cash balance will be $18,800. Accounts receivable on April 1 will total $165,200, of which $141,600 will be collected during April and $18,880 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 $ 334,000 $510,000 $343,000 $266,000 $200,000 $176,500 $ 19,000 $ 19,000 $ 18,800 $ 27,800 $ 27,800 $ 27,800 $ 70,400 $ 70,400 $ 57,890 $ 105,500 $23,000 $ 23,000 $ 23,000 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 $149,000. d. In preparing the cash budget, assume that the $83,000 loan will be made in April and repaid in June. Interest on the loan will total $1,180. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:a. On April 1, the start of the loan period, the cash balance will be $18,800. Accounts receivable on April 1 will total $165,200, of
which $141,600 will be collected during April and $18,880 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
$ 334,000 $510,000
$266,000 $200,000
June
$343,000
$176,500
$ 19,000 $ 19,000 $ 18,800
$ 27,800
$ 57,890
$ 105,500
$ 23,000
27,800 $ 27,800
$
$ 70,400 $ 70,400
$ 23,000 $ 23,000
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 $149,000.
d. In preparing the cash budget, assume that the $83,000 loan will be made in April and repaid in June. Interest on the loan will
total $1,180.
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.
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