Harry’s Carryout Stores has eight locations. The firm wishes to expand by two mo

Question

Harry’s Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:

Of the firm’s sales, 50 percent are for cash and the remaining 50 percent are on credit. Of credit sales, 25 percent are paid in the month after sale and 75 percent are paid in the second month after the sale. Materials cost 40 percent of sales and are purchased and received each month in an amount sufficient to cover the following month’s expected sales. Materials are paid for in the month after they are received. Labor expense is 30 percent of sales and is paid for in the month of sales. Selling and administrative expense is 10 percent of sales and is also paid in the month of sales. Overhead expense is $28,500 in cash per month.

     Depreciation expense is $10,100 per month. Taxes of $8,100 will be paid in January, and dividends of $2,500 will be paid in March. Cash at the beginning of January is $82,000, and the minimum desired cash balance is $77,000.

Prepare a schedule of monthly cash receipts for January, February, and March

Harry’s Carryout Stores
Cash Receipts Schedule

Prepare a schedule of monthly cash payments for January, February, and March.

Harry’s Carryout Stores
Cash Payments Schedule

Prepare a monthly cash budget with borrowings and repayments for January, February, and March.(Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Assume the January beginning loan balance is $0.)

Harry’s Carryout Stores

Harry’s Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:

Explanation / Answer

Answer a. Harry's Carryout Stores Cash Receipts Schedule Nov Dec Jan Feb March Sales          210,000          240,000          300,000          340,000          360,000 Credit Sales          105,000          120,000          150,000          170,000          180,000 Collections: Cash Sales          105,000          120,000          150,000          170,000          180,000 One Month After Sales                     -                       -              30,000            37,500            42,500 Two month After Sales                     -                       -              78,750            90,000          112,500 Total Cash Receipts          258,750          297,500          335,000 Answer b. Harry's Carryout Stores Cash Payments Schedule Jan Feb March Payments for purchases          136,000          144,000          140,000 Labor Expenses            90,000          102,000          108,000 Selling & Administrative            30,000            34,000            36,000 Overhead            28,500            28,500            28,500 Taxes              8,100                     -                       -   Dividends                     -                       -                2,500 Total cash Payments          292,600          308,500          315,000 Answer c. Harry's Carryout Stores Cash Payments Schedule Dec Jan Feb March Total Cash Receipts          258,750          297,500          335,000 Total Cash Payments          292,600          308,500          315,000 Net Cash Flow          (33,850)          (11,000)            20,000 Beginning Cash Balance            82,000            77,000            77,000 Cummulative Cash balance            48,150            66,000            97,000 Monthly loan (repayment)            28,850            11,000          (20,000) Ending cash balance            82,000            77,000            77,000            77,000 Cumulative Loan Balance                     -              28,850            39,850            19,850

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