Question (Worth 3.125 of 25 points) Cash budget (continuation of 35). Assume the
ID: 2552669 • Letter: Q
Question
Question (Worth 3.125 of 25 points) Cash budget (continuation of 35). Assume the following: Animal Gear AG does not make any sales on credit. AG sells only to the public and accepts cash and credit cards, 90% of its Purchases of materials are on account. AG pays for half the purchases in the period of the purchase and the other half in the following period. At the AG plans to replace a machine in April at a net cash cost of $13,000. sales are to customer using credit cards, for which AG gets the cash right away, less a 2% transaction fee. end of March, AG owes suppliers $8,000. Labor, other manufacturing costs, and nonmanufacturing costs are paid in cash in the month incurred except of course depreciation, which is not a cash flow. Depreciation is $25,000 of the manufacturing cost and $10,000 of the nonmanufacturing cost for April. AG currently has a $2,000 loan at an annual interest rate of 24%. The interest is paid at the end of each month. If AG has more that S10000 cash at the end of April it will pay back the loan, AG owes $5,000 in income taxes that need to be remitted in April. AG has cash of $5,900 on hand at the end of March. Other Information: Sales revenue for Apri Purchases for April Operating income for April s 180,000 20,000 $ 175,000 10 1) Prepare a cash budget for April for Animal Gear Cash Budget April inning cash halanrExplanation / Answer
cash budget
For the month of April
beginning cash balance
5900
cash sales
18000
credit sales -90% of total sales less transaction fee
(180000*90%)*98%
158760
total cash available
182660
less cash payment for:
payment to supplier for purchase =8000+10000
18000
purchase of machine
13000
operating expenses net of depreciation =175000-35000
140000
payment of tax
5000
interest on loan = 2000*24%/12
40
total of expenses
176040
preliminary cash balance
6620
additional loan from bank
0
repayment of loan to bank
0
ending cash balance
6620
loan balance at the end of month
2000
cash budget
For the month of April
beginning cash balance
5900
cash sales
18000
credit sales -90% of total sales less transaction fee
(180000*90%)*98%
158760
total cash available
182660
less cash payment for:
payment to supplier for purchase =8000+10000
18000
purchase of machine
13000
operating expenses net of depreciation =175000-35000
140000
payment of tax
5000
interest on loan = 2000*24%/12
40
total of expenses
176040
preliminary cash balance
6620
additional loan from bank
0
repayment of loan to bank
0
ending cash balance
6620
loan balance at the end of month
2000