Marine

Following are the budgeted income statements for the second quarter of 2010 for Marine Tech, Inc.:
April………….May…………….June
Sales $ 210,000..$ 255,000…$ 285,000
Cost of goods sold* 144,000………171,000……189,000

Gross profit $ 66,000……$ 84,000……$ 96,000
Operating expenses† 33,000……….37,500……..40,500

Operating income $ 33,000……$ 46,500…..$ 55,500

* Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead).
† Includes all period costs (i.e., selling, general, and administrative expenses).

The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $18,000 of the estimated monthly cost of goods sold and $12,000 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month.

Current assets as of April 1, 2010, consist of cash of $21,000 and accounts receivable of $224,700 ($157,290 from March credit sales and $67,410 from February credit sales). Current liabilities as of April 1 consist of $27,000 of accounts payable for product costs incurred in March; $6,900 of accrued liabilities for operating expenses incurred in March; and a $60,000, 14%, 120-day note payable that is due on April 17, 2010.

An estimated income tax payment of $60,000 will be made in May. The regular quarterly dividend of $24,000 is expected to be declared in May and paid in June. Capital expenditures amounting to $25,800 will be made in April.

Required:
(a) Complete the monthly cash budgets for the second quarter of 2010 using the following format. Note that the ending cash balance for June is provided as a check figure. (Input all amounts as positive values. Use 360 days year for calculations. Leave no cells blank – be certain to enter “0” wherever required. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)

Marine Tech, Inc.
Cash Budget
For the months of April, May, and June, 2010

April………..May……….June
Beginning cash balance $21,000…….$…………..$
Cash Receipts:
From cash sales made in current month $………….$…………..$
From credit sales made in:
February $…………..$…………..$
March $…………..$…………..$
April $…………..$…………..$
May $…………..$…………..$
Total cash available $…………..$…………..$

Cash Disbursements:
For cost of goods sold/operating
expenses incurred in:
March $………….$……………$
April $…………$……………$
May $………….$……………$
June $………….$……………$
For payment of note payable and interest $…………..$…………..$
For capital expenditures $…………..$…………..$
For payment of income taxes $…………..$…………..$
For payment of dividends $ …………..$………….$
Total disbursements $………. $ ………. $
Ending cash balance $………. $ ………. $ 33,200

b) Assume that management of Marine Tech, Inc., desires to maintain a minimum cash balance of $20,000 at the beginning of each month and has arranged a $100,000 line of credit with a local bank at an interest rate of 11% to ensure the availability of funds. Borrowing transactions are to occur only at the end of months in which the budgeted cash balance would otherwise fall short of the $20,000 minimum balance.