Question

Seager Company budgeted the following credit sales during the current year: September, $100,000; October, $120,000; November, $110,000; December, $111,000. Experience has shown that cash from credit sales is received as follows: 10% in the month of sale, 60% in the first month after sale, 25% in the second month after sale, and 5% is uncollectible. How much cash should Seager Co. expect to collect in November from all current and past credit sales. (1 point). Check: Cash collected in November should be greater than $100,000 but less than $110,000.

5. Billy Yang, Inc. is preparing a cash budget for the second quarter. The following amounts have been budgeted.

	April	May
Sales	$150,000	$157,500
Merchandise purchases	107,000	110,000
Operating expenses:
Payroll	13,000	14,000
Advertising	5,400	5,000
Rent	2,600	2,600
Depreciation	7,500	7,500
End of April balances:
Cash	25,000
Bank loan payable	30,000

Additional data:

(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $120,000.
(2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid in the following month.
(3) Operating expenses are paid in the month they are incurred.
(4) A minimum cash balance of $25,000 is required at the end of each month.
(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Loan repayments are made whenever excess cash is available (cash in excess of $25,000).

Prepare the company's cash budget for the month of May. Show the ending loan balance at May 31. You must use the template on the next page. (6 points) Checks: Preliminary cash balance should be a number between $38,300 and $40,300. Loan balance at the end of the month should be $16,100.   

Billy Yang, Inc Cash Budget For the Month of May

Beginning cash balance                                    $

Cash receipts from sales (a)                                 $

------------------- Beginning cash plus cash receipts                            $

Cash disbursements:

Payments for merchandise (b)                             $

Other (List each item by name and amount):

-------------------- Total cash disbursements (above)                             $

------------------- = Preliminary cash balance                                  $

Less loan repayment                                       $

------------------- = Calculated cash balance, ending                            $

============ Updated loan balance, end of month of May                     $

============

Show work for all numbers above or below. Make sure you show how you calculated a) cash receipts from sales and b) payments for merchandise and all other calculated numbers.

Answer 1