1. value: 2.30 points
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[The following information applies to the questions displayed below.]
Aztec Company sells its product for $200 per unit. Its actual and projected sales follow.
Units Dollars April (actual) 8,500 $1,700,000 May (actual) 2,600 520,000 June (budgeted) 6,500 1,300,000 July (budgeted) 6,000 1,200,000 August (budgeted) 4,300 860,000
All sales are on credit. Recent experience shows that 30% of credit sales is collected in the month of the sale, 40% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 15 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 25% of the next month’s unit sales plus a safety stock of 170 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,416,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $110,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $110,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 10% interest rate. On May 31, the loan balance is $48,000, and the company’s cash balance is $110,000. rev: 11_19_2013_QC_40413
Required:
1. Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
$
Percent Collected in
April May June July August
Credit sales from:
April
May
June
July
August
Amount Collected in
Total April May June July August
Credit sales from:
April 1,700,000
May 520,000
June 1,300,000
July 1,200,000
August 860,000
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Aja JacksonBMAL 530: 2014 Summer B 2
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2. Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
AZTEC COMPANY
Budgeted Ending Inventory
For April, May, June and July
April May June July
Next month’s budgeted sales (units)
Ratio of inventory to future sales
Budgeted “base” ending inventory
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3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
AZTEC COMPANY
Merchandise Purchases Budgets
For May, June, and July
May June July
Required units of available merchandise
Budgeted purchases (units)
Budgeted cost of merchandise purchases
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4. Prepare a table showing the computation of cash payments on product purchases for June and July.
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Cash payments on product purchases (for June and July)
—————— Percent Paid in—————
May June July
From purchases in:
May
June
July
—————— Amount Paid in—————
Total May June July
From purchases in:
May
June
July
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5. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month. (Do not round intermediate calculations.)
AZTEC COMPANY
Cash Budget
June and July
June July
Beginning cash balance
Total cash available
Cash disbursements:
Total cash disbursements
Preliminary cash balance
Ending cash balance
Loan balance
June July
Loan balance – Beginning of month
Additional loan (loan repayment)
Loan balance – End of month
rev: 11_19_2013_QC_40413
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