Reference no: EM133095712
Question - Aztec Company sells its product for $170 per unit. Its actual and budgeted sales follow.
May (Actual):
Sales Units 2,400 Sales Dollars $408, 000
June (Budget):
Sales Units 6,000 Sales Dollars $1,020,000
July (Budget):
Sales Units 5,000 Sales Dollars $850,000
August (Budget):
Sales Units 4,400 Sales Dollars $748,000
All sales are on credit. Collections are as follows: 28% is collected in the month of the sale, and the remaining 72% is collected in the month following the sale. Merchandise purchases cost $110 per unit. For those purchases, 60% is paid in the month of purchase and the other 40% is paid in the month following purchase. The company has a policy to maintain an ending monthly inventory of 24% of the next month's unit sales. The May 31 actual inventory level of 1,440 units is consistent with this policy. Selling and administrative expenses of $111,000 per month are paid in cash. The company's minimum cash balance at month-end is $140,000. Loans are obtained at the end of any month when the preliminary cash balance is below $140,000. Any preliminary cash balance above $140,000 is used to repay loans at month-end. This loan has a 1.0% monthly interest rate. On May 31, the loan balance is $43,000, and the company's cash balance is $140,000.
Required -
1. Prepare a schedule of cash receipts from sales for each of the months of June and July.
2. Prepare the merchandise purchases budget for June and July.
3. Prepare a schedule of cash payments for merchandise purchases for June and July. Assume May's budgeted merchandise purchases is $359,040.
4. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.
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