Herbal Care Corp., a distributor of herb-based sunscreens, is ready to begin its
ID: 2375340 • Letter: H
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 $1,060.
Prepare a cash budget, by month and in total, for the third quarter. (Show deficiencies, and total financing preceded by a minus sign wherever appropriate. Enter all other amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
$
$
$
$
Excess (deficiency) of receipts over disbursements
$
$
$
$
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
Hi,
Please find the answer as follows:
Thanks.
July August September Quarter Total cash available 340100 514200 722900 1577200 Total disbursements 422400 400200 441800 1264400 Excess (deficiency) of receipts over disbursements -82300 114000 281100 312800 Total financing 93300 0 -94360 -1060 Cash balance, ending 11000 114000 186740 186740
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