Asking a question wrt cash budget.
A&B enterprises are currently creating estimates for the first quarter of the upcoming year. The following estimated data relates to A&B enterprises
1.Estimated cash balance on January 1st 20XX: $190,000
2.Estimated accounts receivable balance on January 1st 20XX: $185,000
3.Budgeted sales:
i. January: $540,000
ii. February: $620,000
iii. March: $485,000
4. A&B expects to sell 25% of its merchandise for cash.
5. A&B expects to collect 50% of its credit sales in the month of sale and the remainder in the next month.
6. Estimated accounts payable on January 1st 20XX: $90,000
7. Budgeted manufacturing costs:
i. January: $420,000
ii. February: $390,000
iii. March: $400,000
8. Depreciation expenses on plant and equipment are estimated at $16,000 per month and are included in the manufacturing costs.
9. The estimated accounts payable balance relates only to manufacturing costs. A&B expects to pay 65% of the manufacturing costs in the month in which these costs are incurred and the remaining amount will be paid in the following month.
10. A&B expects to purchase a photocopier in February 20XX: $60,000
11. Estimated income taxes to be paid in March 20XX: $80,000
12. Estimated rent revenue to be received in February 20XX: $16,000
13. Estimated interest expense to be paid in January 20XX: $14,000
14. Estimated selling and administrative expenses paid in the month incurred:
i. January: $70,000
ii. February: $80,000
iii. March: $65,000
15. A&B estimates that they will require a minimum cash balance of $300,000 at the end of each month.
16. Arrangements for a loan facility of $500,000 for the quarter have been made with the company’s bankers. Loans are accessed at the beginning of each month and repayments are made at the end of each month.
17. Interest on the loan is incurred at a rate of 15% per annum.
Required
Prepare the cash budget for A&B enterprises for the quarter ending March 31,20XX.
I am really unclear about the later part wrt the loan repayment.. and the interest payments.
