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P5schedule of Expected Cash Collection

Jo Tan of JTC Products is seeking a P30,000 loan to support inventory purchases for peak sales in April, with a cash budget prepared to evaluate repayment feasibility. The budget outlines expected cash collections and disbursements from April to June, showing total cash collections of P398,200 and disbursements of P697,000, resulting in a cash deficiency. The ending cash balance for June is projected at P9,000, which is below the required minimum cash balance of P20,000, indicating the loan cannot be repaid as planned.

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Aiza Vicedo
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22 views3 pages

P5schedule of Expected Cash Collection

Jo Tan of JTC Products is seeking a P30,000 loan to support inventory purchases for peak sales in April, with a cash budget prepared to evaluate repayment feasibility. The budget outlines expected cash collections and disbursements from April to June, showing total cash collections of P398,200 and disbursements of P697,000, resulting in a cash deficiency. The ending cash balance for June is projected at P9,000, which is below the required minimum cash balance of P20,000, indicating the loan cannot be repaid as planned.

Uploaded by

Aiza Vicedo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Problem S (Schedule of Expected Cash collections; Cash Budget)

Jo Tan, president of JTC Products, has just approached the company's bank
with a request for a P30,000, 90-day loan. The purpose of the loan is to mist
the company in acquiring inventories in support of peak April sales. Since the
company has had some difficulty in paying off its loans in the past, the loan
officer has asked for a cash budget to help determine whether the loan should
be made. The following data are available for the months April —June, during
which the loan will be used:

a. On April I, the start of the loan period, the cash balance will be P26.000.
Accounts receivable on April I will total PI 51.500, of which P141,000
will be collected during April and P7,200 will be collected during May.
The remainder will be uncollectibk.
b. Past experience shows that 20% of a month's sales arc collected in the
month of sale, 75% in the month following sale. and 4% in the second
month following sale. The other PA represents bad debts that are never
collected. Budgeted saki and expenses for the period follow:
april may june
sales 200,000.00 300,000.00 250,000.00
Merchandise purchases 120,000.00 180,000.00 15,000.00
Payroll 9,000.00 9,000.00 8,000.00
Lease payments 15,000.00 15,000.00 15,000.00
Advertising 70,000.00 80,000.00 60,000.00
Equipment purchases 8,000.00 - -
Depreciation 10,000.00 10,000.00 10,000.00

c. Merchandise purchases arc paid in full during the month following


purchase. Accounts payable for merchandise purchases on March 31,
which will be paid during April. total PI 08.000.

d. In preparing the cash budget, assume that the P30,000 loan will be made
in April and repaid in June. Interest on the loan will total PI,200.

Required:
1. Prepare a schedule of expected cash collections for April, May, and June
and for the three months in total.
2. Prepare a cash budget, by month and in total, for the three-month period.
3. If the company needs a minimum cash balance of P20,000 to start each month, can the loan be repaid as planned?
Explain
REQ.1
SCHEDULE OF EXPECTED CASH COLLECTION

april may june total


From accounts recievable 141,000.00 7,200.00 148,200.00
From April sales: -
20%*200,000 40,000.00 40,000.00
75%*200,000 - 150,000.00 150,000.00
4%*200,000 - 8,000.00 8,000.00
From may sales: -
20%*300,000 - 60,000.00 60,000.00
75%*300,000 - 225,000.00 225,000.00
From june sales: -
20%*250,000 - 50,000.00 50,000.00
Total cash collection 181,000.00 217,200.00 283,000.00 398,200.00

reqiuired 2
cash budget
april may june quarter
Cash balance, beg 26,000.00 27,000.00 20,200.00 26,000.00
add receipts
Collection from customer 181,000.00 217,200.00 283,000.00 681,200.00
Total availble 207,000.00 244,200.00 303,200.00 707,200.00
less disbursement
Merchandise purchases 108,000.00 120,000.00 180,000.00 408,000.00
payroll 9,000.00 9,000.00 8,000.00 26,000.00
Lease payments 15,000.00 15,000.00 15,000.00 45,000.00
advertising 70,000.00 80,000.00 60,000.00 210,000.00
Equipment purchases 8,000.00 - - 8,000.00
Total disbursement 210,000.00 224,000.00 263,000.00 697,000.00
Excess(deficiency)of receipts
over disbursement (3,000.00) 20,200.00 40,200.00 10,200.00
fianancing
borrowing 30,000.00 - 30,000.00
repayment - - (30,000.00) (30,000.00)
interest - - (1,200.00) (1,200.00)
Total financing 30,000.00 - (31,200.00) (1,200.00)
Cash bal, ending 27,000.00 20,200.00 9,000.00 9,000.00
repaid as planned?

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