Reference no: EM132562095

ARY, Inc., a distributor of jewelry throughout Pakistan, is in the process of assembling a cash budget for the first quarter of 20x1. The following information has been extracted from the company's accounting records:

• All sales are on account. Sixty percent of customer accounts are collected in the month of sale; 35 percent are collected in the following month. Uncollectible amounting to 5 percent of sales are anticipated, and management believes that only 20 percent of the accounts outstanding on December 31, 20x0, will be recovered and that the recovery will be in January 20x1.
• Seventy percent of the merchandise purchases are paid for in the month of purchase; the remaining 30 percent are paid for in the month after acquisition.
• The December 31, 20x0, balance sheet disclosed the following selected figures: cash, $60,000; accounts receivable, Rs.165,000; and accounts payable, Rs 66,000.
• ARY, Inc., maintains a Rs 60,000 minimum cash balance at all times. Financing is available (and retired) in Rs 1,000 multiples at an 8 percent interest rate, with borrowings taking place at the beginning of the month and repayments occurring at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid at that time.

Additional data:

                                         January                              February                            March

Sales revenue             Rs 450,000                       Rs 540,000                  Rs 555,000

Merchandise purchases   Rs 270,000                     Rs 300,000                    Rs 420,000

Cash operating costs         Rs 93,000                     Rs 72,000                     Rs 135,000

Proceeds from sale of equipment  -                             -                              Rs 15,000

Required:

Question 1. Prepare the a schedule that discloses the firm's total cash collections for January through March.

Question 2. Prepare the a schedule that discloses the firm's total cash disbursements for January through March.

Question 3. Prepare the a schedule that discloses the firm's cash needs, if any, for January through March. The schedule should present the following information in the order cited:

· Beginning cash balance,

· Total receipts (from requirement 1),

· Total payments (from requirement 2),

· The cash excess (deficiency) before financing,

· Borrowing needed to maintain minimum balance,

· Loan principal repaid,

· Loan interest paid,

Ending cash balance.