Question

You are provided with the following information taken from Metlock, Inc.’s March 31, 2022, balance sheet.

Cash		$ 11,630
Accounts receivable		22,600
Inventory		37,120
Property, plant, and equipment, net of depreciation		122,700
Accounts payable		22,540
Common stock		153,700
Retained earnings		12,390

Additional information concerning Metlock, Inc. is as follows.

1.		Gross profit is 27% of sales.
2.		Actual and budgeted sales data:
		March (actual)		$47,000
		April (budgeted)		70,800

3.		Sales are both cash and credit. Cash collections expected in April are:
		March		$18,800		(40% of $47,000)
		April		42,480		(60% of $70,800)
				$61,280

4.		Half of a month’s purchases are paid for in the month of purchase and half in the following month. Cash disbursements expected in April are:
		Purchases March	$22,540
		Purchases April	28,730
			$51,270

5.		Cash operating costs are anticipated to be $12,510 for the month of April.
6.		Equipment costing $2,510 will be purchased for cash in April.
7.		The company wishes to maintain a minimum cash balance of $12,570. An open line of credit is available at the bank. All borrowing is done at the beginning of the month, and all repayments are made at the end of the month. The interest rate is 15% per year, and interest expense is accrued at the end of the month and paid in the following month.

Prepare a cash budget for the month of April. Determine how much cash Metlock, Inc. must borrow, or can repay, in April.

Answer 1

Answer:

Metlock Inc.
Cash Budget
For the Month Ended April 2022
Beginning Cash Balance		$ 11,630
Add: Cash Receipts
March Sales	$18,800
April Sales	$42,480
Total Cash Receipts		$61,280
Total Available Cash		$72,910
Less: Cash Disbursements
March Purchase	$22,540
April Purchase	$28,730
Cash Operating Cost	$12,510
Purchase of Equipment	$2510
Total Disbursement		($66,290)
Cash Excess		$6620
Financing:
Add: Borrowing($12,570 - 6620)		$5950
Less: Repayment		$0
Ending Cash Balance		$12,570