Reference no: EM13738112
PROBLEM 8-21 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 $30,000, 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 $24,000. Accounts receivable on April 1 will total $140,000, of which $120,000 will be collected during April and $16,000 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% represents bad debts that are never collected. Budgeted sales and expenses for the three-month
period f ollow:
April May June
Sales (all on account) . . . . . . . . . . . . . $300,000 $400,000 $250,000
Merchandise purchases . . . . . . . . . . . $210,000 $160,000 $130,000
Payroll . . . . . . . . . . . . . . . . . . . . . . . . . $20,000 $20,000 $18,000
Lease payments . . . . . . . . . . . . . . . . . $22,000 $22,000 $22,000
Advertising . . . . . . . . . . . . . . . . . . . . . . $60,000 $60,000 $50,000
Equipment purchases . . . . . . . . . . . . . - - $65,000
Depreciation . . . . . . . . . . . . . . . . . . . . $15,000 $15,000 $15,000
c. Merchandise purchases are paid in full during the month following purchase. Accounts
payable for merchandise purchases during March, which will be paid during April, total $140,000.
d. In preparing the cash budget, assume that the $30,000 loan will be made in April and repaid in June. Interest on the loan will total $1,200.
382 Chapter 8
Required:
1. Prepare a schedule of 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.
3. If the company needs a minimum cash balance of $20,000 to start each month, can the loan be repaid as planned? Explain.
|
Proposed business process changes for the system
: A description of any proposed business process changes for the system along with flow diagrams A specific discussion on any Internet and mobile access components of the system
|
|
Describes the process the company uses to build its brand
: Select a company with which you are familiar. Write a paper of no more than 700 word that describes the process the company uses to build its brand
|
|
Building up an inventory of standard parts or modules
: Building up an inventory of standard parts or modules instead of immediately producing the finished end items is the essence of delayed differentiation.
|
|
Improvement and evaluation
: Assign a grade to your current or former employer's HR function. Provide a justification for the grade. Then, analyze two improvements that could be implemented quickly (within 3 months' time) that would raise the grade you assigned.
|
|
Prepare a schedule of expected cash collections for april
: 1. Prepare a schedule of 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.3. If the company needs a minimum cash balance of $20,000 to st..
|
|
What is the executional style used in each ad
: The goal of this assignment is to look at how advertising can be used to create different positions for products in the same product category. What is the executional style used in each ad
|
|
Managerial decision making
: Take a position on whether or not managerial groups within a large organization are more likely to make better decisions than individual managers within the same organization. Provide support for your position.
|
|
Organizational change scenario analysis
: Prepare the first section of the HRM Consultancy Report, an analysis of the potential people management issues at play in the chosen scenario organization - Organizational change scenario analysis
|
|
A firm believes it can generate an additional
: A firm believes it can generate an additional $1,800,000 per year in revenues for the next 5 years (years 1-5) and $2,200,000 for the next 5 years after that (years 6-10) if it replaces existing equipment that is no longer usable with new equipment t..
|