Question

The Sun Pacific Company budgeted the following sales:

July                  200,000

August                        210,000

September       190,000

Sales in May were 190,000 and in June 180,000. 60% of sales are cash, 30% of sales are to be collected the next month, and the remaining 10% in 2 months.

Budgeted purchases of the required materials for production are:

July                  100,000

August                        105,000

September       95,000

Purchases in June were 90,000. 70% of purchases are cash and 30% should be paid the next month.

Direct Labor is 35% of purchases

Selling Expenses are 8% of sales

Other Fixed Expenses are $7,000 monthly

Taxes of $25,000 will be paid in September

Dividends of $20,000 will be paid in August

Sun Pacific has a loan with $100,000 outstanding balance in June

Interest expenses are 1% of the last month outstanding balance

The firm cash policy is to maintain a $25,000 ending cash balance (the ending balance in June was $25,000). Excess should be used to repay loans.

REQUIRED CALCULATE

1.Cash payments in September

2.Loan outstanding balance in September

3.Interest payment in August

4.Preliminary Cash balance in September

Answer 1

	1	CASH PAYMENT IN SEPTEMBER
			May	June	July	August	September	October
	A	Sales	$190,000	$180,000	$200,000	$210,000	$190,000
	B	Cash Received from May sales	$114,000	$57,000	$19,000
	C	Cash Received from June sales		$108,000	$54,000	$18,000
	D	Cash Received from July sales			$120,000	$60,000	$20,000
	E	Cash Received from August sales				$126,000	$63,000	$21,000
	F	Cash Received from Septembersales					$114,000	$57,000	$19,000
	G=B+C+D+E+F	Total Cash received from sales	$114,000	$165,000	$193,000	$204,000	$197,000
	H	Beginning cash balance			$25,000	$25,000	$25,000
	I=G+H	Total cash available			$218,000	$229,000	$222,000
	J	Purchases		$90,000	$100,000	$105,000	$95,000
	K	Payment for June Purchase		$63,000	$27,000
	L	Payment for July Purchase			$70,000	$30,000
	M	Payment for August purchase				$73,500	$31,500
	N	Payment for September Purchase					$66,500	$28,500
	O=K+L+M+N	Total payment for purchase		$        63,000	$        97,000	$        103,500	$      98,000	$        28,500
	P=0.35*J	Direct labor payment(35% of purchase)		$31,500	$35,000	$36,750	$33,250
	Q=0.08*A	Selling expense(8% of sales)	$15,200	$14,400	$16,000	$16,800	$15,200
	R	Fixed expenses	$7,000	$7,000	$7,000	$7,000	$7,000
	S	Payment for taxes					$25,000
	T	Payment for dividend				$20,000
	U=O+P+Q+R+S+T	Total cash payment during the month			$     155,000	$        184,050	$   178,450
	V=I-U	Cash Balance at the end of month			$63,000	$44,950	$43,550
	W	Interest payment			$1,000	$630	$436.80
	X=V-W	Cash balance after interest payment			$62,000	$44,320	$43,113
	Y=X-25000	Payment of loan			$37,000	$19,320	$18,113
		Ending Loan balance			$63,000	$43,680	$25,567
		Ending cash balance			$25,000	$25,000	$25,000
	1	Cash Payment in September	$178,450
		Interest payment in September	$436.80
		Payment of loan in September	$18,113
	2	Loan outstanding balance in September	$25,567
	3	Interest Payment in August	$630
	4	Pre.iminary cash balance in September
		Cash available	$222,000
		Cash payments	$178,450
		PreliminaryCash balance at end of month	$43,550