Question

Problem 8-23 Schedule of Expected Cash Collections; Cash Budget [LO8-2, LO8-8] The president of the retailer Prime Products has just approached the company's bank with a request for a $87,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. 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 $39.000. Accounts receivable on April 1 will total $170,800, of which $146.400 will be collected during April and $19,520 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 29 is bad debts that are never collected. Budgeted sales and expenses for the three- month period follow Sales (all on account) Merchandise purchases April 5242 $213. $ 1 $ 292 $ 52.5 Lease payments tie Louiment surchases Depreciation May June 561 110. Bee $ 181.5035135 1 0. 0 20. 295 5 5 5 - 5 1 1 , 51, $ 1 Merchandise purchases are puiding during the month following ourchase. Accounts payable for merchandise purchases during March, which w be paid in April toto $174.500 d. In preparing the cash budget assume that the $87,000 n wil be made in April and repaid in June. Interest on the oan will total $1.220 Required Calculate the expected cash collections for May and need the three months in total Z Prepare a cash budget by month and not for the three month period Complete this question by entering your answers in the tabs below.

Answer 1

Solution Requirement 1: Schedule of expected cash collection April Particulars May June Quarter Cash collection from accounts receivables $146,400 $19,520 $0 $165,920 Cash collection from Sales: - April month sales - May month sales - June month sales Expected Cash collection $72,600 $0 $145,200 $185,400 $0 $350,120 $19,360 $370,800 $93,000 $483,160 $237,160 $556,200 $93,000 $1,052,280 | $219,000 Requirement 2: May $59,000 June $84,720 Quarter $39,000 $350,120 $409,120 $483,160 $567,880 $1,052,280 $1,091,280 Prime Products Cash Budget April Beginning cash balance $39,000 Add: receipts: Collections from customers $219,000 Total cash available $258,000 Less: Cash disbursements: Merchandise purchases $174,600 Payroll $19,600 Lease payments $29,200 Advertising $62,600 Equipment purchases Total cash disbursements $286,000 Excess (deficiency) of cash available over disbursements ($28,000) Financing: Borrowings $87,000 Repayments Interest Total financing $87,000 Ending cash balance $59,000 $213,000 $19,600 $29,200 $62,600 $0 $324,400 $84,720 $181,500 $24,000 $29,200 $47,6801 $112,000 $394,380 $173,500 $569,100 $63,200 $87,600 $172,880 $112,000 $1,004,780 $86,500 $0 $o $0 $0 $0 $0 $84,720 $0 ($87,000) $1,220) ($88,220) $85,280 $87,000 ($87,000) ($1,220) ($1,220) $85,280