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Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company$$s bank late in the current year seeking short$-$term financing, he was told money was very tight and any borrowing over the next year would have to be supported by a detailed statement of cash collections and disbursements. The treasurer also was told it would be very helpful to the bank if borrowers would indicate the quarters in which they need funds, as well as the amounts needed, and the quarters in which repayments could be made.

Because the treasurer is unsure as to the particular quarters in which bank financing will be needed, he assembled the following information to assist in preparing a detailed cash budget:

Budgeted sales and merchandise purchases for next year, as well as actual sales and purchases for the last quarter of the current year, are:

$$SalesMerchandise PurchasesCurrent Year:$$Fourth quarter actual$ $200,000$$ $126,000$Next year:$$First quarter estimated$ $300,000$$ $186,000$Second quarter estimated$ $400,000$$ $246,000$Third quarter estimated$ $500,000$$ $305,000$Fourth quarter estimated$ $200,000$$ $126,000$

All sales are on account. The company normally collects $65\%$ of a quarter$$s sales before the quarter ends and another $33\%$ in the following quarter. The remainder is uncollectible. This pattern of collections is now being experienced in the current year$$s fourth$-$quarter actual data.

Eighty percent of a quarter$$s merchandise purchases are paid for within the quarter. The remainder is paid for in the following quarter.

Selling and administrative expenses for next year are budgeted at $$50,000$ per quarter plus $15\%$ of sales. Of the fixed amount, $$20,000$ each quarter is depreciation.

The company will pay $$10,000$ in dividends each quarter.

Land purchases of $$75,000$ will be made in the second quarter, and purchases of $$48,000$ will be made in the third quarter. These purchases will be for cash.

The Cash account contained $$10,000$ at the end of the current year. The treasurer feels that this represents a minimum balance that must be maintained.

The company's bank allows borrowing in increments of $$1,000$ at the beginning of each quarter, up to a total loan balance of $$100,000.$ The interest rate on these loans is $2\mathrm{.}5\%$ per quarter and, for simplicity, we will assume interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the year.

At present, the company has no loans outstanding.

Required:

Calculate the expected cash collections by quarter and in total for next year.

Calculate the expected cash disbursements for merchandise purchases by quarter and in total for next year.

Calculate the expected cash disbursements for selling and administrative expenses, by quarter and in total for next year.

Prepare a cash budget by quarter and in total for next year.

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