PROBLEM 3 (30 Points) Megabucks Corporation is a distributr of medical supplies.
ID: 2570225 • Letter: P
Question
PROBLEM 3 (30 Points) Megabucks Corporation is a distributr of medical supplies. Management is stadyhn needs for Oetober through December and has assembled the followig Sales October November 554,000 $22,000 S31,000 S 5,000 s 7,000 December $50,000 $20,000 $26,000 S 5,000 $11,000 Purchases of Merchandise S26,000 560,00 Cash Operating Costs $30,000 S 5,000 Equipment Acquisitions S 5,000 Depreciation Expense Dividend Payments S 4,000 The pro forma balance sheet on September 30 had the following anticipated account balances: Cash Accounts Payable S18,000 $10,000 S22,000 Accounts Receivable of all customer accounts, 70% are collected in the month of sale; 25% are collected in the following month. Because of a liberal credit policy, bad debts amounting to 5% of sales are anticipated. Management believes that only $21,000 of the accounts outstanding on September 30th will be collectible. of the merchandise purchases, 40% are paid for in the month of purchase; the remaining 60% are paid in the following month. Megabucks Corporation maintains a $6,000 minimum cash balance at all times. Should borrowing be necessary, financing is available in S 1,000 multiples at a 10'% annual interest rate. Assume that all borrowing takes place at the beginning of the month. Any repayments (including interest) are made at the end of the month. Principal repayments are also made in S1,000 increments. REQUIRED: Prepare in good form a eash budget for the Quarter.Explanation / Answer
October
November
December
Sales
60000
54000
50000
Purchases
26000
22000
20000
Cash Budget
cash opening balance
10000
6600
5991.667
collection of 75% of sales
42000
37800
35000
collection of 25% of previous month sale
21000
15000
13500
total cash available during the month
73000
59400
54491.67
payment towards merchandise purchase
40% of the month purchase
10400
8800
8000
60% of previous month purchase
18000
15600
13200
payment towards merchandis purchase
28400
24400
21200
cash operating cost
30000
31000
26000
Interest
0
8.333
24.999
Equipment acquisition
5000
0
0
Dividend 4000
4000
total expenditure
67400
55408.33
47225
preliminary cash balance = total cash available-total expenditure
5600
3991.667
7266.668
repayment of loan or additional loan
1000
2000
-1000
minimum cash balance
6000
6000
6000
ending cash balance
6600
5991.667
6266.668
loan balance
beginning balance loan account
0
1000
3000
repayment or additional loan
1000
2000
-1000
loan balance- end of month
1000
3000
2000
Interest in the month November
(1000*10%)/12
8.333333
Interest in the month December
(3000*10%)/12
25.00
October
November
December
Sales
60000
54000
50000
Purchases
26000
22000
20000
Cash Budget
cash opening balance
10000
6600
5991.667
collection of 75% of sales
42000
37800
35000
collection of 25% of previous month sale
21000
15000
13500
total cash available during the month
73000
59400
54491.67
payment towards merchandise purchase
40% of the month purchase
10400
8800
8000
60% of previous month purchase
18000
15600
13200
payment towards merchandis purchase
28400
24400
21200
cash operating cost
30000
31000
26000
Interest
0
8.333
24.999
Equipment acquisition
5000
0
0
Dividend 4000
4000
total expenditure
67400
55408.33
47225
preliminary cash balance = total cash available-total expenditure
5600
3991.667
7266.668
repayment of loan or additional loan
1000
2000
-1000
minimum cash balance
6000
6000
6000
ending cash balance
6600
5991.667
6266.668
loan balance
beginning balance loan account
0
1000
3000
repayment or additional loan
1000
2000
-1000
loan balance- end of month
1000
3000
2000
Interest in the month November
(1000*10%)/12
8.333333
Interest in the month December
(3000*10%)/12
25.00
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