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 $93,300, 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:

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%u2019s sales are collected in the month of sale, 69% in the month following sale, and 1% in the second month following sale. The remainder is uncollectible.

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.

In preparing the cash budget, assume that the $93,300 loan will be made in July and repaid in September. Interest on the loan will total $1,060.

Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response)

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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 $93,300, 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:

Explanation / Answer

Requirement 1: Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response) Month July August September Quarter   From accounts receivable:      May sales $            2,300.00 $                   -   $                   -   $          2,300.00     June sales $        186,300.00 $      2,700.00 $                   -   $      189,000.00   From budgeted sales:      July sales $        112,500.00 $ 310,500.00 $      4,500.00 $      427,500.00      August sales $                         -   $ 190,000.00 $ 524,400.00 $      714,400.00      September sales $                         -   $                   -   $    80,000.00 $        80,000.00   Total cash collections $        301,100.00 $ 503,200.00 $ 608,900.00 $ 1,413,200.00

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