arry’s Carryout Stores has eight locations. The firm wishes to expand by two mor
ID: 2735001 • Letter: A
Question
arry’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, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 20 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 40 percent of sales and is paid for in the month of sales. Selling and administrative expense is 20 percent of sales and is also paid in the month of sales. Overhead expense is $35,500 in cash per month.
Depreciation expense is $11,500 per month. Taxes of $9,500 will be paid in January, and dividends of $9,500 will be paid in March. Cash at the beginning of January is $110,000, and the minimum desired cash balance is $105,000.
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
Actual Forecast Additional Information November $ 350,000 January $ 580,000 April forecast $ 490,000 December 520,000 February 620,000 March 500,000Explanation / Answer
a) Cash receipts Schedule November December January February March Sales 350000 520000 580000 620000 500000 Credit sales ( 60%) 210000 312000 348000 372000 300000 Collections Cash sales ( 40%) 140000 208000 232000 248000 200000 Month after sale (40%) 84000 124800 139200 148800 Two months after sale(60%) 126000 187200 208800 Total cash receipts 140000 292000 482800 574400 557600 b) Cash payments schedule Materials purchase disbursement schedule December January February March April Sales 520000 580000 620000 500000 490000 Materials purchase schedule 580000 620000 500000 490000 Materials cost - 20% 116000 124000 100000 98000 Materials purchase disbursement 116000 124000 100000 Cash payment schedule January February March Payment for purchases 116000 124000 100000 Labor expenses - 40% of sales 232000 248000 200000 selling & administrative-20% of sales 116000 124000 100000 Overhead 35500 35500 35500 Taxes 9500 Dividends 9500 Total cash payments 509000 531500 445000 c) Cash Budget December January February March Total Cash receipts 482800 574400 557600 Total cash payments 509000 531500 445000 Net cash flow -26200 42900 112600 Beginning cash balance 110000 105000 126700 Cummulative cash balance 83800 147900 239300 Monthly loan /( repayment) 21200 -21200 0 Ending cash balance 105000 126700 239300 Cummulative loan balance 21200 0 0
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