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    moonkhan209's Avatar
    moonkhan209 Posts: 42, Reputation: 1
    Junior Member

    Nov 6, 2009, 09:40 PM
    Schedule of Expected Cash Collections; Cash Budget
    Problem 9-23 Schedule of Expected Cash Collections; Cash Budget [LO2, LO8]

    Herbal Care Corp. a distributor of herb-based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $39,000, 90-day loan from its bank to help meet cash requirements during the quarter. Since Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:

    On July 1, the beginning of the third quarter, the company will have a cash balance of $33,000.

    Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account):

    May (actual)

    June (actual)

    July (budgeted)

    August (budgeted)

    September (budgeted)


    Past experience shows that 24% of a month’s sales are collected in the month of sale, 68% in the month following sale, and 1% in the second month following sale. The remainder is uncollectible.

    Budgeted merchandise purchases and budgeted expenses for the third quarter are given below:


    Merchandise purchases

    Salaries and wages


    Rent payments



    Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $170,000.

    d.Equipment costing $9,600 will be purchased for cash during July.

    e.In preparing the cash budget, assume that the $39,000 loan will be made in July and repaid in September. Interest on the loan will total $1,000.

    Requirement 1:

    Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total
    Please tell me how to calculate sale for May and June, it is not budgeted, but actual, I put actual, but it is not right. Just tell me what will be the sale of May. I am just stuck on it, rest of the parts are done. Please help me:confused::confused::confused::confused:
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member

    Nov 7, 2009, 04:15 AM

    If you have done the workings for the rest of the problem, it should be clear to you as to how to go about with May and June Sales. In July you will collect 1% of May Sales and 68% of June Sales. In August you will collect 1% of June Sales. Try this out and you should be home
    moonkhan209's Avatar
    moonkhan209 Posts: 42, Reputation: 1
    Junior Member

    Nov 7, 2009, 09:14 AM
    Quote Originally Posted by rehmanvohra View Post
    if you have done the workings for the rest of the problem, it should be clear to you as to how to go about with may and june sales. In july you will collect 1% of may sales and 68% of june sales. In august you will collect 1% of june sales. Try this out and you should be home
    Thank you very very much. I tried this and it worked
    Dr Abdul Aziz's Avatar
    Dr Abdul Aziz Posts: 2, Reputation: 1
    New Member

    Aug 8, 2012, 02:29 PM
    What about if he manage to get overdraft loan from a bank. How tu put the entry in the cash budget. Is it an inflow or outflow ?
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 172
    Ultra Member

    Aug 8, 2012, 03:31 PM
    This is an old thread an assignment it does not call for you to add additional steps

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