Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted: ?April?MaySales ……………………………………………….$150,000?$157,500Merchandise purchases ……………………………107,000?112,400Operating expenses:??? Payroll ………………………………………….13,600?14,280 Advertising …………………………………….5,400?5,700 Rent …………………………………………….2,500?2,500 Depreciation ……………………………………7,500?7,500End of April balances:??? Cash …………………………………………….30,000?? Bank loan payable
………………………………26,000??Additional data:(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000.(2) Purchases are all on credit, with 40% paid in the month of purchase and 60% paid in the following month.(3) Operating expenses are paid in the month they are incurred.(4) A minimum cash balance of $25,000 is required at the end of each month.(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made at the end of the month if the cash balance exceeds $25,000.Prepare the company's cash budget for May. Show the ending loan balance at May 31.
What will be an ideal response?
| Todd Enterprises Cash Budget For the Month of May | ||
| Beginning cash balance …………………………… | ? | $ 30,000 |
| Cash receipts from sales (a) ………………………… | ? | 145,500 |
| Total | ? | $175,500 |
| Cash payments: | ? | ? |
| Payments for merchandise (b) ………………… | $109,160 | ? |
| Payroll ………………………………………… | 14,280 | ? |
| Advertising ……………………………………… | 5,700 | ? |
| Rent …………………………………………… | 2,500 | ? |
| Interest ($26,000 ? 1%) ………………………… | 260 | ? |
| Total cash payments …………………………… | ? | $131,900 |
| Preliminary cash balance …………………………… | ? | $ 43,600 |
| Loan repayment …………………………………… | ? | (18,600) |
| Cash balance, ending ……………………………… | ? | $ 25,000 |
| Loan balance, end of month ……………………… | $ 7,400 |
| a. | Cash collections: | ? |
| ? | May cash sales (40% ? $157,500) | $ 63,000 |
| ? | 50% of April credit sales (50% ? 60% ? $150,000) | 45,000 |
| ? | 50% of March credit sales (50% ? 60% ? $125,000) | 37,500 |
| ? | Total cash collections | $145,500 |
| ? | ? | ? |
| b. | Cash payments for purchases: | ? |
| ? | 40% of May purchases (40% ? $112,400) | $ 44,960 |
| ? | 60% of April purchases (60% ? $107,000) | 64,200 |
| ? | Total cash payments for purchases | $109,160 |
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