Helen Bowers, owner of Helen\'s Fashion Designs, is planning to request a line o

Question

Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for her firm for parts of 2017 $180,000 180,000 360,000 540,000 720,000 360,000 360,000 90,000 May 2017 June Jul ul tember October November December Collection estimates obtained from the credit and collection department are as follows: collections within the month of sale 1090, collections the month following the sale- 75%, collections the second month following the sale: 15%. Payments for labor and raw materials are typically made during the month following the one in which these costs have been incurred. Total labor and raw materials costs are estimated as follows: S90,000 90,000 126,000 882,000 306,000 234,000 162,000 90,000 May 2017 June July August tember October November December General and administrative salaries will amount to approximately $27,000 a month; lease payments under long-term lease contracts will be $9,000 a month; depreciation charges will be S36,000 a month; miscellaneous expenses will be $2,700 a month; income tax payments of S63,000 will be due in both September and December; and a progress payment of $180,000 on a new design studio must be paid in October. Cash on hand on July 1, will amount to $132,000, and a minimum cash balance of $90,000 will be maintained throughout the cash budget period.

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. 1. Schedule of Expected Collection May June July August Sept Oct Nov Dec 6 Months Total Budgeted Sales 180000 180000 360000 540000 720000 360000 360000 90000 2430000 Collection Schedule: Same Month 10% Next Month 75% Second Month 15% Accounts Receivable-Last Year Of May 27000 27000 of June 135000 27000 162000 Jul 36000 270000 54000 360000 Aug 54000 405000 81000 540000 Sept 72000 540000 108000 720000 Oct 36000 270000 54000 360000 Nov 36000 270000 306000 Dec 9000 9000 Total Estimated Collection 198000 351000 531000 657000 414000 333000 2484000 2. Schedule of Payment of Raw Material and Labor July August Sept Oct Nov Dec 6 Months Estimated Payment 90000 126000 882000 306000 234000 162000 1800000 3. Schedule for payment of other expense July August Sept Oct Nov Dec 6 Months Gen and Admin Salaries 27000 27000 27000 27000 27000 27000 162000 Lease payment 9000 9000 9000 9000 9000 9000 54000 Miscellaneous Expense 2700 2700 2700 2700 2700 2700 16200 Income Tax 63000 63000 126000 Progress Payment 180000 180000 Total Payment 38700 38700 101700 218700 38700 101700 538200 Part 1 & 2 3. Cash Budget July August Sept Oct Nov Dec 6 Months Beginning Cash Balance 132000 201300 387600 90000 222300 363600 132000 Add: Collection from Customers 198000 351000 531000 657000 414000 333000 2484000 0 Total Cash Available 330000 552300 918600 747000 636300 696600 2616000 Less: Cash disbursment for -Raw Mat and Labor 90000 126000 882000 306000 234000 162000 1800000 -Other 38700 38700 101700 218700 38700 101700 538200 0 Total Cash Disbursment 128700 164700 983700 524700 272700 263700 2338200 Excess/(Deficiency) 201300 387600 -65100 222300 363600 432900 277800 Financing: Borrowing 155100 155100 Repayments 0 Interest 0 Total Financing 0 0 155100 0 0 0 155100 Ending Cash Balance 201300 387600 90000 222300 363600 432900 432900 Part -3 changing second month collection 70% and third month 20% 1. Schedule of Expected Collection May June July August Sept Oct Nov Dec 6 Months Total Budgeted Sales 180000 180000 360000 540000 720000 360000 360000 90000 2430000 Collection Schedule: Same Month 10% Next Month 70% Second Month 20% Accounts Receivable-Last Year Of May 36000 36000 of June 126000 36000 162000 Jul 36000 270000 54000 360000 Aug 54000 405000 81000 540000 Sept 72000 540000 108000 720000 Oct 36000 270000 54000 360000 Nov 36000 270000 306000 Dec 9000 9000 Total Estimated Collection 198000 360000 531000 657000 414000 333000 2493000 2. Schedule of Payment of Raw Material and Labor July August Sept Oct Nov Dec 6 Months Estimated Payment 90000 126000 882000 306000 234000 162000 1800000 3. Schedule for payment of other expense July August Sept Oct Nov Dec 6 Months Gen and Admin Salaries 27000 27000 27000 27000 27000 27000 162000 Lease payment 9000 9000 9000 9000 9000 9000 54000 Miscellaneous Expense 2700 2700 2700 2700 2700 2700 16200 Income Tax 63000 63000 126000 Progress Payment 180000 180000 Total Payment 38700 38700 101700 218700 38700 101700 538200 Part 1 & 2 3. Cash Budget July August Sept Oct Nov Dec 6 Months Beginning Cash Balance 132000 201300 396600 90000 222300 363600 132000 Add: Collection from Customers 198000 360000 531000 657000 414000 333000 2493000 0 Total Cash Available 330000 561300 927600 747000 636300 696600 2625000 Less: Cash disbursment for -Raw Mat and Labor 90000 126000 882000 306000 234000 162000 1800000 -Other 38700 38700 101700 218700 38700 101700 538200 0 Total Cash Disbursment 128700 164700 983700 524700 272700 263700 2338200 Excess/(Deficiency) 201300 396600 -56100 222300 363600 432900 286800 Financing: Borrowing 146100 146100 Repayments 0 Interest 0 Total Financing 0 0 146100 0 0 0 146100 Ending Cash Balance 201300 396600 90000 222300 363600 432900 432900

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