3) The following information pertains to Amigo Corporation: Month Sales Purchase
ID: 2559367 • Letter: 3
Question
3) The following information pertains to Amigo Corporation:
Month Sales Purchases
July $30,000 $10,000
August 34,000 12,000
September 38,000 14,000
October 42,000 16,000
November 48,000 18,000
December 60,000 20,000
• Cash is collected from customers in the following manner:
Month of sale 40%
Month following sale 40%
Two months following sale 10%
Uncollectible Accounts 10%
• 60% of purchases are paid for in cash in the month of purchase, and the other 40% is paid the following month.
Required: Complete the cash budget (no discounts) for the 4th quarter.
October November December
Beginning Balance: $10,000
Cash Collections from:
August
September
October
November
December
--------------- --------------- -----------------
Total Cash Collections
Total Cash Available
Cash Payments from:
September
October
November
December
-------------- ---------------- -------------------
Total Cash Payments
Ending Cash Balance
Amigo has $50,000 principal loan balance and needs to pay it, but also needs to keep a $10,000 minimum balance. What month is the earliest that Amigo can pay off this loan while keeping the minimum cash balance? ___________________
Explanation / Answer
f* Loan payment:
In October before paying loan 30200 balance exists, if 10000 minimum balance maintained towards loan 20200 can be made. Similarly in November 22600 repayment made. In december towards loan= 50000-20200-22600= 7200 balance unpaid which is cleared in December.
Hence Amigo pay off this loan in December
Aug Sep October November December Sales 34000 38000 42000 48000 60000 Purchases 12000 14000 16000 18000 20000 a Beginning Balance: 10000 10000 10000 Cash Collections from: August 3400 - - September 15200 3800 October 16800 16800 4200 November 19200 19200 December 24000 b Total Cash Collections 35400 39800 47400 Total Cash Available Cash Payments from: September 5600 October 9600 6400 November 10800 7200 December 12000 c Total cash payments 15200 17200 19200 d=a+b-c Ending cash balance 30200 32600 38200 e Desired balance 10000 10000 10000 f* Loan payment 20200 22600 7200 g=d-f Closing balance 10000 10000 31000Related Questions
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