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:
a.
On July 1, the beginning of the third quarter, the company will have a cash balance of $33,000.
b.
Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account):
May (actual)
$
270,000
June (actual)
$
480,000
July (budgeted)
$
530,000
August (budgeted)
$
740,000
September (budgeted)
$
400,000
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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.
c.
Budgeted merchandise purchases and budgeted expenses for the third quarter are given below:
July
August
September
Merchandise purchases
$
233,000
$
350,000
$
173,000
Salaries and wages
$
25,000
$
36,000
$
36,000
Advertising
$
127,000
$
131,000
$
71,000
Rent payments
$
7,600
$
7,000
$
8,100
Depreciation
$
9,100
$
8,700
$
9,700
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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:
