Question

In: Finance

The Sun Pacific Company budgeted the following sales: July                  200,000 August             

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

Solutions

Expert Solution

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

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