Question

TI-1706SV I1. Problems Sweeny Co. is preparing a cash budget for May. The following forecasted data is available: 1. April May Beginning Loan Balance Sales Merchandise purchases Operating expenses (all paid in cash): Payroll Advertising $36,000 $177,500 132,400 $150,500 $127.000 16,280 7,700 3,500 Rent Additional data: (1) Loan balance at beginning of May is $36,000 (as noted above). Interest due each month is 26 of loan balance. (2) Any cash balance above $40,000 is used to repay as much of loan balance as possible. (1) The collection pattern for sales is 60 % in the month of the sale and 40 % in the following month. (2) Purchases are 60% paid in the month of purchase and the other 40% balance paid the next month. Prepare the company's cash budget for May. Show the ending loan balance at May 31. (10 points) Calculate May's cash receipts from customers and use this as "Cash receipts from sales" in the cash. budget: (10 points) a. Cash to be received in May Cash received from May Sales (60 % of current month's sales): Cash received in May from April's credit sales (40 % of April sales): Total cash collections from customers in May: Calculate cash disbursements for purchases and use this as "Cash Payments for purchases" in the b. cash budget: (10 points) Cash to be paid in May Cash paid in May for May purchases (60% of current month's purchases): Cash paid in May for April purchases (40% of April purchases): Total cash paid in May for purchases: 2

Answer 1

Requirement a Cash to be received in May Cash received from May sales (177500*60% 1,06,500 Cash received in May from April's credit sales (150500*40%) 60,200 $ Total cash collections from customers in May 1,66,700 Requirement b Cash to be paid in May Cash paid in May for May purchases (132400*60%) 79,440 Cash paid in May for Apr purchases (127000*40% 50,800 $ Total cash paid in May for purchases 1,30,240 Computing Beginning Cash Balance for the month of May April month cash collections from sale (150500*60% 90,300 (-) April month cash payments for purchases (127000*60%) -76,200 (+) Loan obtained 36,000 $ Beginning cash balance for the month of May 50,100

Cash Budget For the month of May Particulars Amount $ Beginning Cash Balance 50,100 $ () Collections from customers (Req a) 1,66,700 $2,16,800 Total Cash Available (-) Cash Disbursements For Purchases (Req b) 1,30,240 For Payroll $ 16,280 For Advertising 7,700 $ 3,500 For Rent Total Cash Disbursements 1,57,720 Excess/(Deficiency) of cash available over disbursements $ 59,080 Financing Borrowings $ Repayments (59080-720-40000) -18,360 Interest (36000*2%) -720 Total Financing $ -19,080 Ending Cash Balance $ 40,000 Ending Loan Balance (36000-18360) $ 17,640