Herbal Care Corp.. a distributor of herb-based sunscreens, is ready to begin its

Question

Herbal Care Corp.. a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $91.800. 90-day loan from its bank to help meet cash requirements during the quarter. Because Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled: On July 1. the beginning of the third quarter, the company will have a cash balance of $49.000. Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account): Past experience shows that 25% of a month's sales are collected in the month of sale. 70% in the month following sale, and 1% in the second month following sale. The remainder is uncollectible. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30. which will be paid during July, total $213.000. Equipment costing $8.600 will be purchased for cash during July. In preparing the cash budget, assume that the $91.800 loan will be made in July and repaid in September. Interest on the loan will total $1.100. Prepare a cash budget, by month and in total, for the third quarter. (Show deficiencies, and total financing preceded by a minus sign wherever appropriate. Enter all other amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Explanation / Answer

Hi,

Please find complete cash budget as follows:

Thanks,

Aman

July August September Quarter Opening Cash Balance 49000 12000 55400
Sales Value



25% (Collected in the Month) 107500 157500 97500
70% (Month following the Sale) 175000 301000 441000
1% (Second Month following the Sale) 2500 2500 4300
Loan 91800


Total Cash Inflow 376800 461000 542800 1380600




Merchandise Purchases 213000 234000 331000
Salaries and Wages 47000 37000 30000
Advertising 138000 138000 61000
Rent Payments 7200 8600 8600
Equipment 8600


Loan Repayment (91800 + 1100)

92900
Total Cash Outflow 413800 417600 523500 1354900 Closing Cash Balance 12000 55400 74700

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.