Madeleine Bohne, president of the retailer Bohne Products, hasjust approached the company's bank with a request for a $34,000,90-day loan. The purpose of the loan is to assist the company inacquiring inventories in support of peak April sales. Because thecompany has had some difficulty in paying off its loans in thepast, the loan officer has asked for a cash budget to helpdetermine whether the loan should be made. The following data areavailable for the months April–June, during which the loan will beused:


On April 1, the start of the loan period, the cash balance willbe $29,000. Accounts receivable on April 1 will total $135,000, ofwhich $127,500 will be collected during April and $5,000 will becollected during May. The remainder will be uncollectible.


Past experience shows that 19% of a month's sales are collectedin the month of sale, 74% in the month following sale, and 4% inthe second month following sale. The other 3% represents bad debtsthat are never collected. Budgeted sales and expenses for thethree-month period follow:

April May June
Sales (all on account) $ 206,000 $316,000 $ 346,000
Merchandise purchases $ 119,500 $169,500 $ 149,500
Payroll $ 9,000 $ 9,000 $ 8,000
Lease payments $ 13,300 $13,300 $ 13,300
Advertising $ 71,500 $ 74,200 $ 57,200
Equipment purchases $ 8,600 − −
Depreciation $ 9,600 $ 9,600 $ 9,600


Merchandise purchases are paid in full during the monthfollowing purchase. Accounts payable for merchandise purchases onMarch 31, which will be paid during April, total $108,200.


In preparing the cash budget, assume that the $34,000 loan willbe made in April and repaid in June. Interest on the loan willtotal $820.



Prepare a schedule of expected cash collections for April, May,and June and for the three months in total. (Leave no cells blank -be certain to enter "0" wherever required.)

Schedule of Expected Cash Collections
April May June Quarter -Total
From accounts receivable $ $ $ $
From April sales
From May sales
From June sales

Total cash collections $ $ $ $


Prepare a cash budget, by month and in total, for thethree-month period. Assume that expenses are paid in the monthincurred. (Input all amounts as positive values except cashdeficiency, repayments and interest which should be indicated by aminus sign. Leave no cells blank - be certain to enter "0" whereverrequired. Total Financing should be indicated with a minus signwhen the company is repaying amounts that were previouslyborrowed.)

Bohne Products
Cash Budget
April May June Quarter - Total
Cash balance, beginning $ $ $ $
Add receipts:
Collections from customers

Total available

Less disbursements:
Merchandise purchases
Lease payments
Equipment purchases

Total disbursements

Excess (deficiency) of receipts
over disbursements


Total financing

Cash balance, ending $ $ $ $

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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