The president of Vacuity, Inc, has just approached the company\'s bank seeking s

Question

The president of Vacuity, Inc, has just approached the company's bank seeking short-term financing for the coming year, Year 2. Vacuity is a distributor of commercial vacuum cleaners. The bank has stated that the loan request must be accompanied by a detailed cash budget that shows the quarters in which financing will be needed, as well as the amounts that will be needed and the quarters in which repayments can be made To provide this information for the bank, the president has directed that the following data be gathered from which a cash budget can be prepared a. Budgeted sales and merchandise purchases for Year 2, as well as actual sales and purchases for the last quarter of Year 1 are as follows Merchandise Sales Purchases $250,000$150,000 $350,000 S550,000$340 000 Year 1 Fourth quarter actual Year 2 First quarter estimated Second quarter estimated $450 000 $280 000 Third quarter estimated Fourth quarter estmated$430,000 $210.00

Explanation / Answer

Answer 1. Schedule of Expected Cash Collections from Sales Year 2 Total Qtr 1 Qtr 2 Qtr 3 Qtr 4 Collection from Accounts Receivables Year 1 - Q4 Sales     125,000.00        125,000.00 Year 2 - Q1 Sales     168,000.00        175,000.00        343,000.00 Year 2 - Q2 Sales                       -          216,000.00        225,000.00        441,000.00 Year 2 - Q3 Sales                       -                           -          264,000.00        275,000.00        539,000.00 Year 2 - Q4 Sales                       -                           -                           -          206,400.00        206,400.00 Total cash Collections     293,000.00        391,000.00        489,000.00        481,400.00    1,654,400.00 Schedule of Cash Disbursements - Merchandise Purchase Year 2 Total Qtr 1 Qtr 2 Qtr 3 Qtr 4 Cash Payment Year 1 - Qtr 4 Purchase     120,000.00        120,000.00 Year 2 - Qtr 1 Purchase        46,000.00        184,000.00        230,000.00 Year 2 - Qtr 2 Purchase          56,000.00        224,000.00        280,000.00 Year 2 - Qtr 3 Purchase          68,000.00        272,000.00        340,000.00 Year 2 - Qtr 4 Purchase          42,000.00          42,000.00 Total Cash Payment     166,000.00        240,000.00        292,000.00        314,000.00    1,012,000.00 Answer 2. Cash Disbursment -Selling & Admn. Budget Amount Year 2 - Qtr 1     105,000.00 Year 2 - Qtr 2     115,000.00 Year 2 - Qtr 3     125,000.00 Year 2 - Qtr 4     113,000.00 Total     458,000.00 Answer 3. Cash budget Year 2 Total Qtr 1 Qtr 2 Qtr 3 Qtr 4 Cash Balance - Beginning        26,000.00          38,000.00          24,000.00          38,500.00          26,000.00 Add: Collection from Sales     293,000.00        391,000.00        489,000.00        481,400.00    1,654,400.00 Total Cash available     319,000.00        429,000.00        513,000.00        519,900.00    1,680,400.00 Less: Disbursements Merchandise Purchase     166,000.00        240,000.00        292,000.00        314,000.00    1,012,000.00 Operating Expenses     105,000.00        115,000.00        125,000.00        113,000.00        458,000.00 Dividends        10,000.00          10,000.00          10,000.00          10,000.00          40,000.00 Land                       -            86,000.00          47,500.00                         -          133,500.00 Total Disbursement     281,000.00        451,000.00        474,500.00        437,000.00    1,643,500.00 Excess (deficiency) of receipts over disbursements        38,000.00        (22,000.00)          38,500.00          82,900.00          36,900.00 Financing: Borrowings                       -            46,000.00                         -            46,000.00 Repayment                       -          (46,000.00)        (46,000.00) Interest                       -            (4,140.00)          (4,140.00) Net Cash Balance Closing        38,000.00          24,000.00          38,500.00          32,760.00          32,760.00

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