Answer:
a. We have:
June's total cash collections = $605,760
July's total cash collections = $715,580
b. We have:
June's Loan Balance End of Month = $1,324,163
July's Loan Balance End of Month = $2,226,541
Explanation:
a. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
Note: See part a of the attached excel file for the schedule that shows the computation of cash collections for June and July.
In the part a of the attached excel file, we have:
June's total cash collections = $605,760
July's total cash collections = $715,580
b. 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.
Note: See part b of the attached excel file for cash budget for June and July.
In the cash budget in the attached excel file, the following calculations is made:
June additional loan = Minimum required cash balance - June Preliminary cash balance = $110,000 - (-$1,169,663) = $110,000 + $1,169,663 = $1,279,663
July additional loan = Minimum required cash balance - July Preliminary cash balance = $110,000 - (-$792,378) = $110,000 + $792,378 = $902,378
From the cash budget, we have:
June's Loan Balance End of Month = $1,324,163
July's Loan Balance End of Month = $2,226,541
