PROBLEM 3 (30 Points) Megabucks Corporation is a distributr of medical supplies.

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

Thank you!

Cash Collection Budget: Particulars October November December Sales 60000 54000 50000 In the Month(70%) 42000 37800 35000 In the Following Month(30%) 21000 15000 13500 Total Collections 63000 52800 48500 Cash Payment Budget: Particulars October November December Purchases 26000 22000 20000 In the Month(40%) 10400 8800 8000 In the Following Month(60%) 18000 15600 13200 Total Payment for Purchases 28400 24400 21200 Cash Operating Costs 30000 31000 26000 Total Recurring Payments 58400 55400 47200 Cash Budget for the Quarter OND: Particulars October November December Opening Cash Balance 10000 6600 6000 Total Collections 63000 52800 48500 Total Available Funds 73000 59400 54500 Total Recurring Payments 58400 55400 47200 Equipment Acquisions 5000 7000 11000 Dividend Payments 4000 - - Total Payments 67400 62400 58200 Gross Cash Balance 5600 -3000 -3700 Loan Taken 1000 9000 10000 Loan Repaid - - - Interest on Loan - - - Closing Balance 6600 6000 6300 Gross Cash Balance 5600 -3000 -3700 Required Closing Cash 6000 6000 6000 Loan taken in Multiples of 1000 1000 9000 10000

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