Assume that sales and expenses forecasts for months April, May, June, and July are as follows. 20% of all sales in a month are paid in the same month, 60% are paid in the next month, and 20% are paid in the second month after. All expenses in a month are paid in the same month. There is a $20,000,000 minimum required cash balance at the end of each month, and any shortage from this minimum requirement will be covered by obtaining a loan.Any excess over $20,000,000 will be used to reduce or pay off cumulative loan.Initial cash balance in June is $6,000,000 and there is no cumulative loan at this time.Monthly prorated tax rate is 2%, and monthly interest rate on cumulative loan is 1%. Requirements: Prepare cash budget proforma for months June and July and interpret the result in detail.
Assume that sales and expenses
20% of all sales in a month are paid in the same month, 60% are paid in the next month, and 20% are paid in the second month after. All expenses in a month are paid in the same month. There is a $20,000,000 minimum required cash balance at the end of each month, and any shortage from this minimum requirement will be covered by obtaining a loan.Any excess over $20,000,000 will be used to reduce or pay off cumulative loan.Initial cash balance in June is $6,000,000 and there is no cumulative loan at this time.Monthly prorated tax rate is 2%, and monthly interest rate on cumulative loan is 1%.
Requirements:
Prepare cash budget proforma for months June and July and interpret the result in detail.
![Month
Sales
$40,000,000
$35,000,000
$50,000,000
$60,000,000
Expenses
$25,000,0
$20,000,000
$30,000,000
$35,000,000
Аpril
May
June
July](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7afbe4fe-6afa-490d-b01e-2e4e9995f4a5%2F7e92e7fc-8f4c-485b-8b27-30318e9e3a68%2Flqhk76w_processed.jpeg&w=3840&q=75)
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