Juan’s Taco Company has restaurants infive college towns. Juan wants to expand i

ID: 2445798 • Letter: J

Question

Juan’s Taco Company has restaurants infive college towns. Juan wants to

expand into Austin and College Station andneeds a bank loan to do this. Mr.

Bryan, the banker, will finance constructionif Juan can present an acceptable

three-month financial plan for Januarythrough March. Following are actual and

forecasted sales figures:

Of Juan’s sales, 30 percent are forcash and the remaining 70 percent are on

credit. Of credit sales, 40 percent are paidin the month after sale and 60 percent

are paid in the second month after the sale.Materials cost 20 percent of sales

and are paid for in cash. Labor expense is50 percent of sales and is also paid in

the month of sales. Selling andadministrative expense is 5 percent of sales and

is also paid in the month of sales. Overheadexpense is $12,000 in cash per

month; depreciation expense is $25,000 permonth. Taxes of $20,000 and

dividends of $16,000 will be paid in March.Cash at the beginning of January is

$70,000, and the minimum desired cashbalance is $65,000.

For January, February, and March, prepare aschedule of monthly cash

receipts, monthly cash payments, and acomplete monthly cash budget with

borrowings and repayments.

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.