Posted: July 6th, 2016

. Prepare the merchandise purchases budget for May, June, and July. Report calculation in units and then show the dollar amount of purchases for each month?

of 100 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,200,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $60,000. This minimum is maintained, if necessary by borrowing cash from the bank. If the balance exceeds $60,000 the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 9% interest rate. On May 31, the loan balance is $32,000 and the company’s cash balance is $60,000.

(1). Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.

(2). Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.

(3). Prepare the merchandise purchases budget for May, June, and July. Report calculation in units and then show the dollar amount of purchases for each month.

(4) Prepare a table showing the computation of cash payments on product purchases for June and July.

(5). Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month

(6). Refer to your answer to part (5). Abcus’s cash budget indicates the company will need to borrow more than $40,000 in June and will need to borrow $60,000 in July. Suggest some reasons that knowing this information in May would be helpful to management.