Problem 1 - John's Sporting Goods is preparing its annual cash budget, showing quarterly data, for 2008. A $20,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments ar 12% annual interest. The company borrows at the beginning of a quarter based on the estimated deficiency. Interest is paid only when principal is repaid at teh end of a quarter with excess cash. The maximum amount of principal was repaid in the second quarter. The cash balance on December 31, 2007 is $21,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at:
Disbursements: $226,000 (Quarter 1) $226,000 (Q2) $244,000 (Q3) $260,000 (Q4)
Receipts: $216,000 (Quarter 1) $230,000 (Q2) $245,000 (Q3) $253,000 (Q4)
Prepare a schedule of estimated borrowings and repayments of principal and interest for 2008 and its quarters.
Problem 2 - Carson's Widget Works makes 70% of its sales on credit. Experince shows that 60% of the credit customers pay in the month of sale, 30% within the following month, and the rest in the next month. Total sales for May, June, July, and August are estimated at $280,000; $320,000; $400,000; and $340,000, respectively.
Determine budgeted cash receipts for July and August.