The president of the retailer Prime Products has just approached the companys bank with a request for a $30,000, 90-day loan. The purpose of the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months April through June, during which the loan will be used:

a,) On April 1, the start of the loan period, the cash balance will be $35,400. Accounts receivable on April 1 will total $188,400, of which $155,500 will be collected during April and $28,400 will be collected during May. The remainder will be uncollectible.

b.) Past experience shows that 30% of a months sales are collected in the month of sale, 60% in the month following sale, and 8% in the second month following sale. The other 2% represents bad debts that are never collected. Budgeted sales and expenses for the three-month period follow:

	April				May				June
Sales (all on account)	$	305,000			$	542,000			$	339,000
Merchandise purchases		251,000				231,000				140,000
Payroll		32,600				32,600				20,700
Lease payments		24,500				24,500				24,500
Advertising		62,000				62,000				73,880
Equipment purchases		?				?				79,500
Depreciation		26,800				26,800				26,800
c.) Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases during March, which will be paid during April, total $169,000. d.) In preparing the cash budget, assume that the $30,000 loan will be made in April and repaid in June. Interest on the loan will total $880. Required: 1. Prepare a schedule of expected cash collections for April, May, and June, and for the three months in total. Schedule of Expected Cash Collections April May June Quarter From accounts receivable From April sales From May sales From June sales Total cash collections

2. Prepare a cash budget, by month and in total, for the three-month period. (Cash deficiency, repayments and interest should be indicated by a minus sign.)