|
|
|
|
New Member
|
|
Mar 23, 2011, 01:29 PM
|
|
Herbal Care Corp. a distributor of herb-based sunscreens, is ready to begin its thir
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 $40,000, 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 $44,500.
b.
Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account):
May (actual) $250,000
June (actual) $300,000
July (budgeted) $400,000
August (budgeted) $600,000
September (budgeted) $320,000
Past experience shows that 25% of a month's sales are collected in the month of sale, 70% in the month following sale, and 3% 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 $240,000 $350,000 $175,000
Salaries and wages $45,000 $50,000 $40,000
Advertising $130,000 $145,000 $80,000
Rent payments $9,000 $9,000 $9,000
Depreciation $10,000 $10,000 $10,000
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 $180,000.
d. Equipment costing $10,000 will be purchased for cash during July.
e.
In preparing the cash budget, assume that the $40,000 loan will be made in July and repaid in September. Interest on the loan will total $1,200.
|
|
|
BossMan
|
|
Mar 23, 2011, 01:41 PM
|
|
Thank you for taking the time to copy your homework to AMHD.
Please refer to this announcement: CLICK HERE !!
|
|
|
Ultra Member
|
|
Mar 24, 2011, 08:50 AM
|
|
We do not DO homework here. We help. Help means you have to try it first and show work.
|
|
|
New Member
|
|
Apr 22, 2011, 12:25 PM
|
|
I've gotten that far... I have the same homework, but still have few more questions...
Scgedule of cash collections
May... June... July... August... September... October
Sales/Revenue
$250,000.00... $300,000.00... $400,000.00... $600,000.00... $320,000.00
Beginning cash
... $44,500.00...
25% cur.month
$62,500.00... $75,000.00... $100,000.00... $150,000.00... $80,000.00
70% 1st month
$175,000.00... $210,000.00... $280,000.00... $420,000.00... $224,000.00
3% 2nd month
$7,500.00... $9,000.00... $12,000.00... $18,000.00
Other income... $40,000.00
Total collection per month... $357,500.00... $439,000.00... $512,000.00
Total cash inflow for 3rd Quarter... $1,353,000.00
Schedule of cash payments
... July... August... Sept... Oct
Merchandise purchases... $180,000.00... $240,000.00... $350,000.00... $175,000.00
Salaries and
Wages... $45,000.00... $50,000.00... $40,000.00
Advertising ... $130,000.00... $145,000.00... $80,000.00
Rent payments... $9,000.00... $9,000.00... $9,000.00
Depreciation... $10,000.00... $10,000.00... $10,000.00
Equipment... $10,000.00
Loan interest... $1,200.00
Do I count depreciation every month as a cash payment? Where do I calculate the repayment of the loan?
If the company needs a MIN cash balance of $20,000.00 to start each month, can the loan be repaid as planned? Please explain!
I'd appreciate everyone's help. I tried to get the answers... if wrong so far, please, correct me :)
|
|
|
Ultra Member
|
|
Apr 22, 2011, 01:08 PM
|
|
Depreciation does not affect your cash flows, as it is a non cash operating expense. The problem states that the loan will be repaid in September.
|
|
|
New Member
|
|
Apr 22, 2011, 03:39 PM
|
|
So, then it would look like this?
Schedule of cash collections
Other income - for July 40,000.00
Schedule of cash payments
... July... August... Sept... Oct
Merchandise purchases... $180,000.00... $240,000.00... $350,000 .00... $175,000.00
Salaries and
Wages... $45,000.00... $50,000.00.. . $40,000.00
Advertising... $130,000.00... $145,000.00... $80,000.0 0
Rent payments... $9,000.00... $9,000.00... $9, 000.00
Equipment... $10,000.00
Loan principal + interest (in september)... $1,200.00
Once the loan is coming in July as income, and once repaid in Sept + interest in payments?
Why depreciation does not go in cash operations if given in the description of task in operations? Sorry, this is only one chapter of the book we study accounting and I'm not really familiar with operations at all!
Thanks!
|
|
|
New Member
|
|
Apr 22, 2011, 04:20 PM
|
|
Is this the cash budget and right answers?
Cash budget of cash operations
July August September
Beginning cash $44,500.00 $28,000.00 $23,000.00
Cash Collections $357,500.00 $439,000.00 $512,000.00
Available cash $402,000.00 $467,000.00 $535,000.00
Cash Payments $374,000.00 $444,000.00 $520,200.00
Ending cash $28,000.00 $23,000.00 $14,800.00
Minimum cash $20,000.00 $20,000.00 $20,000.00
Borrow $ -
Invest $8,000.00 $3,000.00 $(5,200.00)
If we have $20,000.00 min cash every month the loan would NOT be able to be repaid as planned as we'll have only $14,800.00 cash ending in Sept?? Or will it be able to be repaid??
Thanks!
|
|
Question Tools |
Search this Question |
|
|
Add your answer here.
Check out some similar questions!
Closing a S-Corp Home Based Business
[ 0 Answers ]
I recently received my SS disability and want to close my S-Corp home based computer repair business that has been inactive for a year. I have no assets or liabilities as I traveled to a customer s site to make the repairs. This corp is a one man band, just myself
Forget Hillary care, what about School-Based "Health Care?"
[ 37 Answers ]
Middle school in Maine to offer birth control pills, patches to pupils
When I was in school about the only good school "health care" was for was a bandaid, an excuse to skip a class or a pan to puke in. What on earth (or in the constitution) gives public schools the right to prescribe drugs...
View more questions
Search
|