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Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow.

	May (Actual)	June (Budget)	July (Budget)	August (Budget)
Sales units	2,400	6,000	5,000	4,000
Sales dollars	$ 384,000	$ 960,000	$ 800,000	$ 640,000

All sales are on credit. Collections are as follows: 28% is collected in the month of the sale, and the remaining 72% is collected in the month following the sale. Merchandise purchases cost $110 per unit. For those purchases, 60% is paid in the month of purchase and the other 40% is paid in the month following purchase. The company has a policy to maintain an ending monthly inventory of 19% of the next months unit sales. The May 31 actual inventory level of 1,140 units is consistent with this policy. Selling and administrative expenses of $153,000 per month are paid in cash. The companys minimum cash balance at month-end is $130,000. Loans are obtained at the end of any month when the preliminary cash balance is below $130,000. Any preliminary cash balance above $130,000 is used to repay loans at month-end. This loan has a 0.5% monthly interest rate. On May 31, the loan balance is $46,000, and the companys cash balance is $130,000. Required: 4. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.

AZTEC COMPANY Cash Budget June and July June July Beginning cash balance $130,000 $130,000 Add: Cash receipts from sales 545,280 915,200 Total cash available 675,280 1,045,200 Less: Cash payments for: Merchandise purchases 519,156 529,100 Selling and administrative expenses 153,000 153,000 Interest expense 230 Total cash payments 672,386 682,100 Preliminary cash balance Ending cash balance $0 $0 Loan balance June July Loan balance - Beginning of month $46,000 Additional loan (loan repayment) Loan balance - End of month $46,000

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