3) The following information pertains to Amigo Corporation: Month Sales Purchase
ID: 2560876 • Letter: 3
Question
3) The following information pertains to Amigo Corporation:
Month Sales Purchases
July $30,000 $10,000
August 34,000 12,000
September 38,000 14,000
October 42,000 16,000
November 48,000 18,000
December 60,000 20,000
• Cash is collected from customers in the following manner:
Month of sale 40%
Month following sale 40%
Two months following sale 10%
Uncollectible Accounts 10%
• 60% of purchases are paid for in cash in the month of purchase, and the other 40% is paid the following month.
Required: Complete the cash budget (no discounts) for the 4th quarter.
October November December
Beginning Balance: $10,000
Cash Collections from:
August 13,600
September
October
November
December
--------------- --------------- -----------------
Total Cash Collections
Total Cash Available
Cash Payments from:
September
October
November
December
-------------- ---------------- -------------------
Total Cash Payments
Ending Cash Balance
Amigo has $50,000 principal loan balance and needs to pay it, but also needs to keep a $10,000 minimum balance. What month is the earliest that Amigo can pay off this loan while keeping the minimum cash balance? ___________________
Explanation / Answer
October
November
December
Beginning Balance (A)
10,000
30,200
52,800
Cash Collection from:
August
3,400
Sept.
15,200
3,800
Oct.
16,800
16,800
4,200
Nov.
19,200
19,200
Dec.
24,000
Total Cash Collection (B)
35,400
39,800
47,400
Total Cash Available C (A+B)
45,400
70,000
100,200
Cash Payments
Sept.
5,600
Oct.
9,600
6,400
Nov.
10,800
7,200
Dec.
12,000
Total Cash Payments (D)
15,200
17,200
19,200
Ending Cash Balance (C-D)
30,200
52,800
81,000
Company can pay the loan of $50,000 in the month of December as in the month of December they have $81,000 in cash and after paying loan they will still have $31,000 left with them.
October
November
December
Beginning Balance (A)
10,000
30,200
52,800
Cash Collection from:
August
3,400
Sept.
15,200
3,800
Oct.
16,800
16,800
4,200
Nov.
19,200
19,200
Dec.
24,000
Total Cash Collection (B)
35,400
39,800
47,400
Total Cash Available C (A+B)
45,400
70,000
100,200
Cash Payments
Sept.
5,600
Oct.
9,600
6,400
Nov.
10,800
7,200
Dec.
12,000
Total Cash Payments (D)
15,200
17,200
19,200
Ending Cash Balance (C-D)
30,200
52,800
81,000
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