Problem 8-21 Schedule of Expected Cash Collections; Cash Budget [LO2, LO8] Natur
ID: 2372351 • Letter: P
Question
Problem 8-21 Schedule of Expected Cash Collections; Cash Budget [LO2, LO8]
Natural Care Corp., a distributor of natural cosmetics, is ready to begin its third quarter, in which peak sales occur. The company has requested a $70,000, 90-day loan from its bank to help meet cash requirements during the quarter. Because Natural Care has experienced difficulty in paying off its loans in the past, the bank’s loan officer has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:
Equipment costing $25,000 will be purchased for cash during July.
In preparing the cash budget, assume that the $70,000 loan will be made in July and repaid in September. Interest on the loan will total $2,600.
Natural Care Corp., a distributor of natural cosmetics, is ready to begin its third quarter, in which peak sales occur. The company has requested a $70,000, 90-day loan from its bank to help meet cash requirements during the quarter. Because Natural Care has experienced difficulty in paying off its loans in the past, the bank’s loan officer has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled:
Explanation / Answer
begginning balace = 44000
cash collection in july = 2% * 430000 + 70% * 390000 + 25% * 440000 =391600
cash collection in august =2% * 390000 + 70% * 440000 + 25% *520000 =445800
cash collection in september = 2% * 440000 + 70% * 520000 +25% * 517000 =502050
cash inflow = 440000 + 391600+ 445800 + 502050 = 1383450
july : 234000 +78000+ 88000 +28000 + 43000 = 471000+25000 = 496000
august : 264000 +78000+ 98000 +28000 + 43000 = 511000
september: 260000+63000+ 99000 +28000 + 43000= 493000 +2600 = 495600
cash outlow = 1502600
nt cash balance in september = 1383450 - 1502600 = -119150