Question

The president of Univax, Inc., has just approached the company's bank seeking short-term financing for the coming year, Year 2. Univax is a distributor of commercial vacuum cleaners. The bank has stated that the loan request must be accompanied by a detailed cash budget that shows the quarters in which financing will be needed, as well as the amounts that will be needed and the quarters in which repayments can be made. To provide this information for the bank, the president has directed that the following data be gathered from which a cash budget can be prepared: a. Budgeted sales and merchandise purchases for Year 2, as well as actual sales and purchases for the last quarter of Year 1, are as follows: Merchandise Pu Year 1 Fourth quarter actual $350,000 $250,000 Year 2 First quarter estimated Second quarter estimated Third quarter estimated Fourth quarter estimated $450,000 $330,000 $550,000 $650,000 $440,000 $530,000 $380,000 $310,000 b. The company typically collects 53% of a quarter's sales before the quarter ends and another 45% in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in c Some 10% fa quarter's merchandise purchases are paid for within the quarter. The remainder is paid d. Selling and administrative expenses for Year 2 are budgeted at S84.000 per quarter plus 8% of sales. Of the actual data for the Year 1 fourth quarter in the following quarter the fixed amount, $15,000 each quarter is depreciation. thn purchayes walye an ung the e 00 n the second quarter and $48 500 in t. Land purchases will be made as follows during the year: $96,000 in the second quarter and $48,500 in g. The Cash account contained $36,000 at the end of Year 1. The company must maintain a minimum h. The company has an agreement with a local bank that allows the company to borrow in increments of the third quarter cash balance of at least $34,000 $10,000 at the beginning of each quarter, up to a total loan balance of $100,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the year i. At present, the company has no loans outstanding 名0 F1 FS F7 1e as as it is able, repay 18 company would, far l. Al present, the company has no loans outstanding Required ofexpected cash clectors on sales by quarter and in total for Year 2 (Leave no celis blank be certain to enter "0" wherever required. Omit the "$" sign in your response) Schedule of Expected Cash Collections Year 1-Fourth quarter sales Year 2-First quarter sales Year 2-Second quarter sales Year 2-Third quarter sales Year 2-Fourth quarter salers Total cash collections 1b. Prepare a schedule of expected cash disbursements for merchandise purchases, by quarter and in total for Year 2. (Leave no cells blank - be certain to enter "O" wherever required. Omit the "s sign in your response.) Schedule of Expected Cash Disbursements-Merchandise Purchases Year 2 Quarter Year 1-Fourth quarter purchases Year 2-First quanter purchases Year 2- Second quarter purchases Year 2-Third quater purchases Year 2- Fourth quarter purchases Total cash disbursements HTJ

Answer 1

Ans.1a.

Schedule of Expected Cash Collections-Sales

	Year 2 Quarter(Amount in $)				Total
	First	Second	Third	Fourth
Year 1--Fourth Quarter Sales	350000$\times$45%=157500	0	0	0	157500
Year 2--First Quarter Sales	450000$\times$53%=238500	450000$\times$45%=202500	0	0	441000
Year 2--Second Quarter Sales	0	550000$\times$53%=291500	550000$\times$45%=247500	0	539000
Year 2--Third Quarter Sales	0	0	650000$\times$53%=344500	650000$\times$45%=292500	637000
Year 2--Fourth Quarter Sales	0	0	0	530000$\times$53%=280900	280900
Total cash collections	396000	494000	592000	573400	2055400

Ans.1b.

Schedule of Expected Cash Disbursements-Mercandise Purchases

	Year 2 Quarter(Amount in $)				Total
	First	Second	Third	Fourth
Year 1--Fourth Quarter purchases	250000$\times$90%=225000	0	0	0	225000
Year 2--First Quarter purchases	330000$\times$10%=33000	330000$\times$90%=297000	0	0	330000
Year 2--Second Quarter purchases	0	380000$\times$10%=38000	380000$\times$90%=342000	0	380000
Year 2--Third Quarter purchases	0	0	440000$\times$10%=44000	440000$\times$90%=396000	440000
Year 2--Fourth Quarter purchases	0	0	0	310000$\times$10%=31000	31000
Total cash disbursements	258000	335000	386000	427000	1406000