ces Problem 8-23 (Algo) 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 $89,000, 90-day loan. purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following 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 $33,400. Accounts receivable on April 1 will total $173,600, of w $148,800 will be collected during April and $19,840 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%E the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the thr month period follow: Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April $ 302,000 $ 206,000 $ 29,800 $ 28,200 $ 73,600 $0 $20,800 Required: May $518,000 $ 134,500 $ 29,800 $ 28,200 $73,600 00 $ 20,800 June $ 277,000 $ 149,000 $ 24,500 $ 28,200 $43,680 $ 98,000 $ 20,800 c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases dur March, which will be paid in April, total $160,500, d. In preparing the cash budget, assume that the $89,000 loan will be made in April and repaid in June. Interest on the loan will to $1,240.
ces Problem 8-23 (Algo) 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 $89,000, 90-day loan. purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following 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 $33,400. Accounts receivable on April 1 will total $173,600, of w $148,800 will be collected during April and $19,840 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%E the second month following sale. The other 2% is bad debts that are never collected. Budgeted sales and expenses for the thr month period follow: Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation April $ 302,000 $ 206,000 $ 29,800 $ 28,200 $ 73,600 $0 $20,800 Required: May $518,000 $ 134,500 $ 29,800 $ 28,200 $73,600 00 $ 20,800 June $ 277,000 $ 149,000 $ 24,500 $ 28,200 $43,680 $ 98,000 $ 20,800 c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases dur March, which will be paid in April, total $160,500, d. In preparing the cash budget, assume that the $89,000 loan will be made in April and repaid in June. Interest on the loan will to $1,240.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 8-23 (Algo) 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 $89,000, 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 $33,400. Accounts receivable on April 1 will total $173,600, of which
$148,800 will be collected during April and $19,840 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 2% is bad debts that are never collected. Budgeted sales and expenses for the three-
month period follow:
Sales (all on account)
Merchandise purchases
Payroll
Lease payments
Advertising
Equipment purchases
Depreciation
April
May
June
$ 302,000
$518,000 $ 277,000
$ 206,000 $ 134,500 $ 149,000
$ 29,800
$ 29,800
$ 24,500
91
$
28,200
$ 28,200
$ 28,200
$ 43,680
$ 73,600
$73,600
00
$ 98,000
$0
$20,800
$ 20,800
$ 20,800
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 $160,500,
d. In preparing the cash budget, assume that the $89,000 loan will be made in April and repaid in June. Interest on the loan will total
$1,240.
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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdead88a2-0ef7-48c9-8d78-426ba1780967%2Fd418159b-243a-4f34-af2f-7c094e9712a1%2Faplpwhn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:ces
Problem 8-23 (Algo) 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 $89,000, 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 $33,400. Accounts receivable on April 1 will total $173,600, of which
$148,800 will be collected during April and $19,840 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 2% is bad debts that are never collected. Budgeted sales and expenses for the three-
month period follow:
Sales (all on account)
Merchandise purchases
Payroll
Lease payments
Advertising
Equipment purchases
Depreciation
April
May
June
$ 302,000
$518,000 $ 277,000
$ 206,000 $ 134,500 $ 149,000
$ 29,800
$ 29,800
$ 24,500
91
$
28,200
$ 28,200
$ 28,200
$ 43,680
$ 73,600
$73,600
00
$ 98,000
$0
$20,800
$ 20,800
$ 20,800
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 $160,500,
d. In preparing the cash budget, assume that the $89,000 loan will be made in April and repaid in June. Interest on the loan will total
$1,240.
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.
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