Prime Products hopes to borrow $32,000 on April 1 and repay it plus interest of $800 on June 30. The following data are available for the months April through June, during which the loan will be used: a. On April 1, the start of the loan period, the cash balance will be $33,600. Accounts receivable on April 1 will total $142,800, of which $122,400 will be collected during April and $16,320 will be collected during May. The remainder will be uncollectible. b. The company estimates 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% are bad debts that are never collected. Budgeted sales and expenses for the three- month period follow: April Sales (all on account) $ 366,000 May $ 634,000 June $ 340,000 Merchandise purchases Payroll $ 285,000 $ 203,000 $ 21,000 $ 21,000 Lease payments. $ 35,000 $ 35,000 $ 171,500 34,900 $ $ 35,000 Advertising $ 71,000 $ 71,000 $ 67,200 Equipment purchases $ 89,500 Depreciation $ 22,000 $ 22,000 $ 22,000 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 $153,500. 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. Assume the $32,000 loan is made on April 1 and repaid with interest on June 30. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a cash budget, by month and in total, for the three-month period. Assume the $32,000 loan is made on April 1 and repaid with interest on June 30. Note: Cash deficiency, repayments and interest should be indicated by a minus sign. Beginning cash balance Add receipts: Collections from customers Total cash available Less cash disbursements: Merchandise purchases Payroll Lease payments Prime Products Cash Budget April May June Quarter 0 0 0 0 Advertising Equipment purchases Total cash disbursements 0 0 0 0 Excess (deficiency) of cash available over disbursements 0 0 0 0 Financing: Borrowings Repayments Interest Total financing Ending cash balance 0 0 0 0 S 0 $ 0 $ 0 Required 1 Required 2 >

Prime Products hopes to borrow $32,000 on April 1 and repay it plus interest of $800 on June 30. The following data are available for the months April through June, during which the loan will be used: a. On April 1, the start of the loan period, the cash balance will be $33,600. Accounts receivable on April 1 will total $142,800, of which $122,400 will be collected during April and $16,320 will be collected during May. The remainder will be uncollectible. b. The company estimates 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% are bad debts that are never collected. Budgeted sales and expenses for the three- month period follow: April Sales (all on account) $ 366,000 May $ 634,000 June $ 340,000 Merchandise purchases Payroll $ 285,000 $ 203,000 $ 21,000 $ 21,000 Lease payments. $ 35,000 $ 35,000 $ 171,500 34,900 $ $ 35,000 Advertising $ 71,000 $ 71,000 $ 67,200 Equipment purchases $ 89,500 Depreciation $ 22,000 $ 22,000 $ 22,000 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 $153,500. 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. Assume the $32,000 loan is made on April 1 and repaid with interest on June 30. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a cash budget, by month and in total, for the three-month period. Assume the $32,000 loan is made on April 1 and repaid with interest on June 30. Note: Cash deficiency, repayments and interest should be indicated by a minus sign. Beginning cash balance Add receipts: Collections from customers Total cash available Less cash disbursements: Merchandise purchases Payroll Lease payments Prime Products Cash Budget April May June Quarter 0 0 0 0 Advertising Equipment purchases Total cash disbursements 0 0 0 0 Excess (deficiency) of cash available over disbursements 0 0 0 0 Financing: Borrowings Repayments Interest Total financing Ending cash balance 0 0 0 0 S 0 $ 0 $ 0 Required 1 Required 2 >

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 21MC: A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an...

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