Janus Products, Inc., is a merchandising company that sells binders, paper, and other school supplies.

Janus Products, Inc., is a merchandising company that sells binders, paper, and other school supplies. The company is planning its cash needs for the third quarter. In the past, Janus Products has had to borrow money during the third quarter to support peak sales of back-to-school materials, which occur during August. The following information has been assembled to assist in preparing a cash budget for the quarter:

 

a.	Budgeted monthly absorption costing income statements for July–October are as follows:

	July		August		September		October
Sales	$	40,000	$	70,000	$	50,000	$	45,000
Cost of goods sold		24,000		42,000		30,000		27,000
Gross margin		16,000		28,000		20,000		18,000
Selling and administrative expenses:
Selling expense		7,200		11,700		8,500		7,300
Administrative expense*		5,600		7,200		6,100		5,900
Total selling and administrative expenses		12,800		18,900		14,600		13,200
Net operating income	$	3,200	$	9,100	$	5,400	$	4,800

*Includes $2,000 depreciation each month.

   

b.	Sales are 20% for cash and 80% on credit.
c.	Credit sales are collected over a three-month period with 10% collected in the month of sale, 70% in the month following sale, and 20% in the second month following sale. May sales totaled $30,000, and June sales totaled $36,000.
d.	Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable for inventory purchases at June 30 total $11,700.
e.	The company maintains its ending inventory levels at 75% of the cost of the merchandise to be sold in the following month. The merchandise inventory at June 30 is $18,000.
f.	Land costing $4,500 will be purchased in July.
g.	Dividends of $1,000 will be declared and paid in September.
h.	The cash balance on June 30 is $8,000; the company must maintain a cash balance of at least this amount at the end of each month.
i.	The company has an agreement with a local bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

   

Required:
1.	Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Omit the "$" sign in your response.)

   

Schedule of Expected Cash Collections
	July	August	September	Quarter
Cash sales	$ 8,000	$ 14,000	$ 10,000	$ 32,000
Sales on account:
May	4,800	0	0	4,800
June	20,160	5,760	0	25,920
July	3,200	22,400	6,400	32,000
August	0	5,600	39,200	44,800
September	0	0	4,000	4,000
Total cash collections	$ 36,160	$ 47,760	$ 59,600	$ 143,520

  

2.	Prepare the following for merchandise inventory:

   

a.	A merchandise purchases budget for July, August, and September. (Input all amounts as positive values. Do not round intermediate calculations. Omit the "$" sign in your response.)

Merchandise Purchases Budget
	July	August	September
Budgeted cost of goods sold	$ 24,000	$ 42,000	$ 30,000
Add : Ending inventory	31,500	22,500	20,250
Total needs	55,500	64,500	50,250
Deduct : Beginning inventory	18,000	31,500	22,500
Required inventory purchases	$ 37,500	$ 33,000	$ 27,750

   

b.	A schedule of expected cash disbursements for merchandise purchases for July, August, and September and for the quarter in total. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Schedule of Expected Cash Disbursements
	July	August	September	Quarter
Accounts payable, June 30	$ 11,700	0	0	$ 11,700
July purchases	18,750	18,750	0	37,500
August purchases	0	16,500	16,500	33,000
September purchases	0	0	13,875	13,875
Total cash disbursements	$ 30,450	$ 35,250	$ 30,375	$ 96,075

   

3.

Prepare a cash budget for July, August, and September and for the quarter in total. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Janus Products, Inc. Cash Budget For the Quarter Ended September 30
	July	August	September	Quarter
Cash balance, beginning	$ 8,000	$ 8,410	$ 8,020	$ 8,000
Add collections from sales	36,160	47,760	59,600	143,520
Total cash available	44,160	56,170	67,620	151,520
Less disbursements:
For inventory purchases	30,450	35,250	30,375	96,075
For selling expenses	7,200	11,700	8,500	27,400
For administrative expenses	3,600	5,200	4,100	12,900
For land	4,500	0	0	4,500
For dividends	0	0	1,000	1,000
Total disbursements	45,750	52,150	43,975	141,875
Excess (deficiency) of cash available over disbursements	-1,590	4,020	23,645	9,645
Financing:
Borrowings	10,000	4,000	0	14,000
Repayment	0	0	-14,000	-14,000
Interest	0	0	-380	-380
Total financing	10,000	4,000	-14,380	-380
Cash balance, ending	$ 8,410	$ 8,020	$ 9,265	$ 9,265