In: Finance
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.Accounts payable for the next period (October)
2.If the company purchase a machine with a cost of $30,000 in September, doeswill the company need a loan?
3.If the answer to 2 is yes, what will be the amount?
Answer 1 | ||||||||
Accounts payable for the next period (October) = Budgeted purchases for September * 30% = $95000 * 30% = $28,500 | ||||||||
Answer 2 & 3 | ||||||||
Cash Budget for July , August and September | ||||||||
July | August | September | ||||||
Receipts | ||||||||
Sales Collection | ||||||||
Cash | $120,000.00 | $126,000.00 | $114,000.00 | |||||
May sales collection | $19,000.00 | |||||||
June Sales Collection | $54,000.00 | $18,000.00 | ||||||
July sales collection | $60,000.00 | $20,000.00 | ||||||
August sales Collection | $63,000.00 | |||||||
Total Receipts | $193,000.00 | $204,000.00 | $197,000.00 | |||||
Payments | ||||||||
Cash Purchase | $70,000.00 | $73,500.00 | $66,500.00 | |||||
Credit purchase | $27,000.00 | $30,000.00 | $31,500.00 | |||||
Direct Labour | $35,000.00 | $36,750.00 | $33,250.00 | |||||
Selling Expenses | $16,000.00 | $16,800.00 | $15,200.00 | |||||
Other fixed expenses | $7,000.00 | $7,000.00 | $7,000.00 | |||||
Taxes | $25,000.00 | |||||||
Dividend | $20,000.00 | |||||||
Interest on loan | $1,000.00 | $630.00 | $436.80 | |||||
Purchase of machine | $30,000.00 | |||||||
Total Payments | $156,000.00 | $184,680.00 | $208,886.80 | |||||
Cash Surplus | $37,000.00 | $19,320.00 | -$11,886.80 | |||||
Add : Beginning Cash balance | $25,000.00 | $25,000.00 | $25,000.00 | |||||
Total Cash Available | $62,000.00 | $44,320.00 | $13,113.20 | |||||
Less : Loan repayment | $37,000.00 | $19,320.00 | $0.00 | |||||
Add : Loan taken | $0.00 | $0.00 | $11,886.80 | |||||
Ending Cash balance | $25,000.00 | $25,000.00 | $25,000.00 | |||||
Yes , the company need a loan to purchase a machine in september. | ||||||||
Amount of Loan = $11,886.80 | ||||||||