Assume the following information for the month of August. June sales = $40,000;

Question

Assume the following information for the month of August. June sales = $40,000; July sales = $65,000; August sales = $52,850. All sales are on account and are collected as follows: 20% in the current month, 50% in the month following, 25% in the second month following, and 5% uncollectible. The beginning cash balance is $14,670, with cash payments of $24,653. If the minimum cash balance is $50,000, what is the amount needed by the bank, or how much is available to pay towards the bank loan? Show the amount needed as a positive number, and the amount to repay a loan as a negative number.

Explanation / Answer

Calculation of Cash Collection in August through sales:

Schedule of Cash receipts and payment:

Amount($) Collection for June Sales (40,000 x 25%) 10,000 Collection for July (65,000 x 50%) 32,500 Collection for August (52,850 x 20%) 10,570 Total 53,070

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