Jodi Horton, president of the retailer Crestline Products, has just approached t

Question

Jodi Horton, president of the retailer Crestline Products, has just approached the company's bank witha request for a $33,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories in support of peak April sales. 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-June, during which the loan will be used a. On April 1, the start of the loan period, the cash balance will be $28,000. Accounts receivable on April 1 will total $130,000, of which $122,500 will be collected during April and $5,200 will be collected during May. The remainder will be uncollectible b. Past experience shows that 19% of a month's sales are collected in the month of sale, 74% in the month following sale, and 4% in the second month following sale. The other 3% represents bad debts that are never collected. Budgeted sales and expenses for the three-month period follow May April $ 203,000 313,000 $ 343,000 $ 120,700 $170,700 $150,700 $ 9,100 S 9,100 $8,100 $ 13,900 $13,900 $ 13,900 $ 71,300 $74,100 $ 57,100 $ 8,700 $ 10,200 $10,200 $ 10,200 une Sales (all on account) Merchandise purchases Payroll Lease payments Advertising Equipment purchases Depreciation c. Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on March 31, which will be paid during April, total $107,600 d. In preparing the cash budget, assume that the $33,000 loan will be made in April and repaid in June Interest on the loan will total $780 Required 1. Prepare a schedule of expected cash collections for April, May, and June and for the three months in total Schedule of Expected Cash Collections May June April 122,500$5,200 Quarter From accounts receivable: From April sales From May sales From June sales Total cash collections $ 127,700 8,120 196,910 59,470231,620 291,090 65,170 $ 161,070$ 214,890 304,910 $ 680,870 $ 38,570 150,220 65,170

Explanation / Answer

(a) Preparation of a schedule of expected cash collections for April,May and June and for the three months in total.We have,

Schedule of Expected cash collections

(2) Preparation of cash budget,by month and total, for the three month period.We have,

Crestline Products

Cash budget

Particulars April May June Quarter From account receivable $ 122,500 $ 5,200 $ 127,700 From April sales 38,750 150,220 8,120 196,910 From May sales 59,470 231,620 291,090 From June sales 65,170 65,170 Total cash collections $ 161,070 $ 214,890 $ 304,910 $ 680,870

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

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