Herbal Care Corp., a distributor of herb-based sunscreens, is readyto begin its third quarter, in which peak sales occur. The companyhas requested a $70,700, 90-day loan from its bank to help meetcash requirements during the quarter. Because Herbal Care hasexperienced difficulty in paying off its loans in the past, theloan officer at the bank has asked the company to prepare a cashbudget for the quarter. In response to this request, the followingdata have been assembled:
a. On July 1, the beginning of the third quarter, the company willhave a cash balance of $33,000.
b. Actual sales for the last two months and budgeted sales for thethird quarter follow (all sales are on account):
May (actual) $240,000
June (actual) $250,000
July (budgeted) $580,000
August (budgeted) $620,000
September (budgeted) $360,000
Past experience shows that 26% of a month
Herbal Care Corp., a distributor of herb-based sunscreens, is readyto begin its third quarter, in which peak sales occur. The companyhas requested a $70,700, 90-day loan from its bank to help meetcash requirements during the quarter. Because Herbal Care hasexperienced difficulty in paying off its loans in the past, theloan officer at the bank has asked the company to prepare a cashbudget for the quarter. In response to this request, the followingdata have been assembled:
a. On July 1, the beginning of the third quarter, the company willhave a cash balance of $33,000.
b. Actual sales for the last two months and budgeted sales for thethird quarter follow (all sales are on account):
May (actual) $240,000
June (actual) $250,000
July (budgeted) $580,000
August (budgeted) $620,000
September (budgeted) $360,000
Past experience shows that 26% of a month
Related questions
Herbal Care Corp., a distributor of herb-based sunscreens, is readyto begin its third quarter, in which peak sales occur. The companyhas requested a $93,300, 90-day loan from its bank to help meetcash requirements during the quarter. Because Herbal Care hasexperienced difficulty in paying off its loans in the past, theloan officer at the bank has asked the company to prepare a cashbudget for the quarter. In response to this request, the followingdata have been assembled: |
| a. | On July 1, the beginning of the third quarter, the company willhave a cash balance of $39,000. |
| b. | Actual sales for the last two months and budgeted sales for thethird quarter follow (all sales are on account): |
| May (actual) | $230,000 |
| June (actual) | $270,000 |
| July (budgeted) | $450,000 |
| August (budgeted) | $760,000 |
| September (budgeted) | $320,000 |
Past experience shows that 25% of a month%u2019s sales arecollected in the month of sale, 69% in the month following sale,and 1% in the second month following sale. The remainder isuncollectible. |
| c. | Budgeted merchandise purchases and budgeted expenses for the thirdquarter are given below: |
| July | August | September | |
| Merchandise purchases | $230,000 | $346,000 | $169,000 |
| Salaries and wages | $49,000 | $32,000 | $26,000 |
| Advertising | $143,000 | $131,000 | $62,000 |
| Rent payments | $8,600 | $7,200 | $7,800 |
| Depreciation | $8,800 | $9,700 | $8,500 |
Merchandise purchases are paid in full during the month followingpurchase. Accounts payable for merchandise purchases on June 30,which will be paid during July, total $213,000. |
| d. | Equipment costing $8,800 will be purchased for cash duringJuly. |
| e. | In preparing the cash budget, assume that the $93,300 loan will bemade in July and repaid in September. Interest on the loan willtotal $1,060. |
| Requirement 1: |
Prepare a schedule of expected cash collections for July, August,and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required.Omit the "$" sign in your response) |
| Month | ||||
| July | August | September | Quarter | |
| From accounts receivable: | ||||
| May sales | $ | $ | $ | $ |
| June sales | ||||
| From budgeted sales: | ||||
| July sales | ||||
| August sales | ||||
| September sales | ||||
| Total cash collections | $ | $ | $ | $ |
P8-23 - Please explain how you arrived at your answers.Thank you!
| Problem 8-23 Schedule of Expected Cash Collections; Cash Budget[LO2, LO8]
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