Clay Corporation Has Projected Sales and Production in Units for the Second

question 165

Essay

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: Cash-related production costs are budgeted at $5 per unit produced.Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month.Selling and administrative expenses will amount to $100, 000 per month.The accounts payable balance on March 31 totals $190, 000, which will be paid in April.
All units are sold on account for $14 each.Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale.Accounts receivable on April 1 totaled $500, 000 ($90, 000 from February's sales and $410, 000 from March's sales).
Required:
a.Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation.
b.Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation.

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Definitions:

Loan Payment Schedule

A detailed plan listing individual payment amounts and dates throughout the term of a loan, showing both principal and interest components.

Amortized Loan

a loan in which the principal and interest are paid down over time through fixed monthly payments.

Effective Rate

The effective rate, often referred to as the effective annual rate, is the interest rate on a loan or financial product re-compounded on a yearly basis.

Amortization Schedule

An amortization schedule is a table detailing each periodic payment on an amortizing loan, illustrating how the principal amount is reduced over time.