The Hale Company is currently working on its cash budget for thecoming year. The...

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Accounting

The Hale Company is currently working on its cash budget for thecoming year. The following information is available:
Projected sales for the coming year:
Month
Projected Sales
January
$850,000
February
750,000
March
730,000
April
850,000
May
830,000
June
750,000
July
900,000
The collection history of the Hale Company has been asfollows:
20% of sales are collected in the month of the sale.
60% of the sales are collected in the month following thesale.
12% of the sales are collected in the 2^nd monthfollowing the sale.
5% of the sales are collected in the 3^rd monthfollowing the sale.
The following information regarding costs is available:
The cost of goods sold is 54% of sales
Items for sale are purchased in the month of the sale.
80% of accounts payable are paid in the month following when thecost is incurred.
20% of accounts payable are paid in the 2^nd monthfollowing when the cost is incurred.
Wages are 28% of sales and are paid currently
Annual general and administrative costs are $1,411,200 and areincurred evenly throughout the year.
Annual property taxes are $14,000 and are paid semi annually inJune and October.
A $10,000 cash capital purchase will be made in April.
The beginning cash balance in April is expected to be $47,000.The Hale Company has a policy of maintaining a minimum cash balanceof $45,000. The company has an arrangement with a local bank for aline of credit that carries a 10% annual interest rate. If theending monthly balance falls below $45,000, the company will borrowagainst the line of credit so that the minimum balance can bemaintained. If the company has borrowed against the line of creditand a cash balance is expected to be above $45,000 at the end of aparticular month, then repayments will be made bringing the cashbalance down to $45,000. Interest on the line of credit is paidmonthly. Assume that all line of credit transactions occur on thelast day of the month.
Required:
Prepare a cash budget for the Hale Company for the2^nd quarter of the year. Include April, May, June, and aquarter total in your budget.

Answer & Explanation Solved by verified expert

3.7 Ratings (540 Votes)

All amounts are in Particulars April May June Total quarter Opening balance of cash 4700000 4500000 4500000 4500000 Cash collected from sales 74050000 80110000 78650000 232810000 A Total cash receipts before overdraft 78750000 78750000 Bank overdraft to be taken 6914000 6914000 Total cash receipts after bank overdraft 85664000 84610000 83150000 253424000 Cash paid to creditors 44604000 See Answer

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Transcribed Image Text

In: AccountingThe Hale Company is currently working on its cash budget for thecoming year. The following...The Hale Company is currently working on its cash budget for thecoming year. The following information is available:Projected sales for the coming year:MonthProjected SalesJanuary$850,000February750,000March730,000April850,000May830,000June750,000July900,000The collection history of the Hale Company has been asfollows:20% of sales are collected in the month of the sale.60% of the sales are collected in the month following thesale.12% of the sales are collected in the 2nd monthfollowing the sale.5% of the sales are collected in the 3rd monthfollowing the sale.The following information regarding costs is available:The cost of goods sold is 54% of salesItems for sale are purchased in the month of the sale.80% of accounts payable are paid in the month following when thecost is incurred.20% of accounts payable are paid in the 2nd monthfollowing when the cost is incurred.Wages are 28% of sales and are paid currentlyAnnual general and administrative costs are $1,411,200 and areincurred evenly throughout the year.Annual property taxes are $14,000 and are paid semi annually inJune and October.A $10,000 cash capital purchase will be made in April.The beginning cash balance in April is expected to be $47,000.The Hale Company has a policy of maintaining a minimum cash balanceof $45,000. The company has an arrangement with a local bank for aline of credit that carries a 10% annual interest rate. If theending monthly balance falls below $45,000, the company will borrowagainst the line of credit so that the minimum balance can bemaintained. If the company has borrowed against the line of creditand a cash balance is expected to be above $45,000 at the end of aparticular month, then repayments will be made bringing the cashbalance down to $45,000. Interest on the line of credit is paidmonthly. Assume that all line of credit transactions occur on thelast day of the month.Required:Prepare a cash budget for the Hale Company for the2nd quarter of the year. Include April, May, June, and aquarter total in your budget.

Month	Projected Sales
January	$850,000
February	750,000
March	730,000
April	850,000
May	830,000
June	750,000
July	900,000