The company expects about 30% of sales to be cash transactions. Of sales on acco
ID: 2415371 • Letter: T
Question
The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $20,400 of the estimated monthly cost of goods sold and $13,600 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month.
Current assets as of April 1, 2013, consist of cash of $23,800 and accounts receivable of $254,660 ($178,262 from March credit sales and $76,398 from February credit sales). Current liabilities as of April 1 consist of $30,600 of accounts payable for product costs incurred in March; $7,820 of accrued liabilities for operating expenses incurred in March; and a $68,000, 10%, 120-day note payable that is due on April 17, 2013.
An estimated income tax payment of $68,000 will be made in May. The regular quarterly dividend of $27,200 is expected to be declared in May and paid in June. Capital expenditures amounting to $29,240 will be made in April.
Complete the monthly cash budgets for the second quarter of 2013 using the following format. Note that the ending cash balance for June is provided as a check figure. Assume that management of Sea Tech, Inc., desires to maintain a minimum cash balance of $18,500 at the beginning of each month and has arranged a $100,000 line of credit with a local bank at an interest rate of 10% to ensure the availability of funds. Borrowing transactions are to occur only at the end of months in which the budgeted cash balance would otherwise fall short of the $18,500 minimum balance. Repayments of principal and interest are to occur at the end of the earliest month in which sufficient funds are expected to be available for repayment. (Round your intermediate calculations and answers to whole number. Use 360 days year for calculations.)
Following are the budgeted income statements for the second quarter of 2013 for Sea Tech, Inc.:Explanation / Answer
Answer:
SEATECH, INC. Cash Budget For the months of April, May, and June, 2013 April May June Beginning Cash Balance $ 23,800 $ 18,500 $ 18,500 Cash Receipts: From cash sales made in current month 71,400 86,700 96,900 From credit sales made in: February (from analysis in Step 1 above) 76,398 March (from analysis in Step 1 above) 106,957 71,305 April (from analysis in Step 1 above) 99,960 66,640 May (from analysis in Step 1 above) 121,380 Total Cash Available $ 278,555 $ 276,465 $ 303,420 Cash Disbursements: For cost of goods sold/operating expenses incurred in: March (from analysis in Step 1 above) $ 38,420 April (from analysis in Step 1 above) $ 187,680 46,920 May (from analysis in Step 1 above) 216,240 54,060 June (from analysis in Step 2 above) 235,280 For payment of note payable and interest 74,800 For capital expenditures 29,240 For payment of income taxes 68,000 For payment of dividends 27,200 Total Disbursements $ 330,140 $ 331,160 $ 316,540 Excess (deficiency) of available cash over disbursements $ (51,585) $ (54,695) $ (13,120) Borrowings 70,085 73,195 31,620 Repayments Interest Ending Cash Balance $ 18,500 $ 18,500 $ 18,500