5. Billy Yang, Inc. is preparing a cash budget for the second quarter. The follo

Question

5. Billy Yang, Inc. is preparing a cash budget for the second quarter. The following amounts have been budgeted. ApriMay S15000 $157.50 Sales 000 0,00 Operating expenses: Payroll 3,000 14,000 54005000 2,600 2,600 7.500 7,500 Rent Depreciation d of April balances: Cash Bank loan payable En 25,000 0.000 Additional data: (1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $120,000 (2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid in the following month (3) Operating expenses are paid in the month they are incurred. (4) A minimum cash balance of $25,000 is required at the end of each month. (5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Loan repayments are made whenever excess cash is available (cash in excess of $25,000) Prepare the company's cash budget for the month of May. Show the ending loan balance at May 31. You must use the template on the next page. (6 points) Checks: Preliminary cash balance should be a number between 537,000 and $40,000. Updated loan balance at end of month should be a number between $13,000 and $17,000

Explanation / Answer

Cash Budget

for the month of may

**Cash collection : [May sales *% of cash sale ]+ [March sales * % of credit sales *% of collection]+[apri; sales * % of credit sales *% of collection]

=[157500*.40*]+[120000*.60*.50]+[150000*.60*.50]

= 144000

**Payment for purchase :[110000*.40]+[107000*.60]=

Cash Budget

for the month of may

Beginning cash balance 25000 Cash collection 144000 Total cash available for disbursement 169000 less:cash disbursement Payment for purchase (108200) payroll (14000) advertising (5000) Rent (2600) Total disbursement (129800) Excess of cash over disbursement 39200 Financing Borrowing Interest   [30000*.01] (300) Repayment (13900)     [39200-300-25000] Ending cash balance 25000

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