ezto.mheducation.com Welcome, Zeinab- Black Chapter 7 adz For Marks (15%) Westex
ID: 2598014 • Letter: E
Question
ezto.mheducation.com Welcome, Zeinab- Black Chapter 7 adz For Marks (15%) Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company's bank in late 2019 seeking short-term finanaing, he was told that money was very tight and that any borrowing over the next year would have to statement of cash receipts and disbursements. He was also told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarters in which repayments could be made. Since the treasurer is unsure as to the particular quarters in which the bank financing will be needed, he has assembled the following information to assist in preparing a detailed cash budget a.Budgeted sales and merchandise purchases for the year 2020, as well as actual sales and purchases for the last quarter of 2019, are as follows Merchandise Purchases Sales 2019: Fourth-quarter actual $ 420,000 $ 264,600 2020 m600 520,800 ,050,000640,500 20,000264,600 First-quarter estimated Second-quarter estimated 840,000 ,840,000 Fourth-quarter estimated Fourth-quarter stimated b. The company normally collects 65% of a quarter's sales before the quarter ends and another 33% in the following quarter. The remainder are uncolectiblio. This pattern of collections is now being experienced in the 2019 fourth-quarter actual data. C. 80% of a quarter's merchandise purchases are paid for within the quarter. The remander are paid in the following quarter d Operating expenses fo the year 2020 are budgeted quarto y at $105,000 plus 15% of sales. Of the fired amount, $42,000 each quarter is depreciation. e. The company will pay $21,000 in dividends each quarter f. Equipment purchases of $157,500 will be made in the second quarter, a made in the third quarter. These purchases will be for cash. nd purchases of $100,800 will be contained $21,000 at the end of 2019. The treasurer feels that this reprosentsa minimum balance that must be maintained borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a borrowings and all repayments of the principal must be be in any amount. (Compute interest on whole months,e.g. 1/12, 2/12) at an annual merest rate of 10%. Interest is paid only when the principal is repaid. Al in round $1,000 amounts. Intorest payments can i. At present, the company has no loans outstanding Required 1. Prepare the following by quarter and in total for the year 2020 a. A schedule of expected cash colections WESTEX PRODUCTS Schedule of Expected Cash Collections Second First 2015-Fourth-quarter sales Third Fourth Total
Explanation / Answer
1.a. WESTEX PRODUCTS Schedule of cash collections First Second Third Fourth Total 2019-Fourth quarter sales 138600 138600 2020 - First quarter sales 409500 207900 617400 2020 - Second quarter sales 546000 277200 823200 2020 - Third quarter sales 682500 346500 1029000 2020 - Fourth quarter sales 273000 273000 Total 548100 753900 959700 619500 2881200 1.b. WESTEX PRODUCTS Schedule of cash disbursements for merchandise purchases First Second Third Fourth Total 2019-Fourth quarter purchases 52920 52920 2020 - First quarter purchases 312480 78120 390600 2020 - Second quarter purchases 416640 104160 520800 2020 - Third quarter purchases 512400 128100 640500 2020 - Fourth quarter purchases 211680 211680 Total 365400 494760 616560 339780 1816500 2. Compute expected cash payments for operating expenses First Second Third Fourth Total Fixed expenses 105000 105000 105000 105000 420000 Variable expenses (15% of sales) 94500 126000 157500 94500 472500 Total expenses 199500 231000 262500 199500 892500 Depreciation expense 42000 42000 42000 42000 42000 Cash payments for operating expenses 157500 189000 220500 157500 850500 WESTEX PRODUCTS Cash budget for the year ending December 31, 2020 First Second Third Fourth Total Beginning cash balance 21000 25200 21840 22680 21000 Collections from sales 548100 753900 959700 619500 2881200 Total cash available for disbursements 569100 779100 981540 642180 2902200 Cash disbursements: For merchandise 365400 494760 616560 339780 1816500 For operating expenses 157500 189000 220500 157500 724500 For dividend 21000 21000 21000 21000 84000 For equipment purchase 157500 100800 258300 Interest 7875 7875 total cash disbursements 543900 862260 958860 526155 2891175 Cash surplus / (deficit) 25200 -83160 22680 116025 11025 Financing Borrowing 105000 105000 Repayments -95000 -95000 Interest 2625 2625 2625 7875 Ending cash balance 25200 21840 22680 21025 21025
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