(Cash budget) Bixby Manufacturing has incurred substantial losses for several years and has decided to declare bankruptcy. The company petitioned the court for protection from creditors on March 31, 1995, and submitted the following balance sheet:

Bixby’s management informed the court that the company has developed a new product and that a prospective customer is willing to sign a contract for the purchase of 10,000 units of this product during the year ending March 31, 1997, 12,000 units during the year ending March 31, 1998, and 15,000 units during the year ending March 31, 1999, at a firm price of $90 per unit for all units. This product can be manufactured using Bixby’s present facilities. Monthly pro¬ duction with immediate delivery is expected to be uniform within each year. Receivables are expected to be collected during the calendar month following sales. Unit production costs of the new product are estimated as follows:

Fixed costs of $130,000 (excluding depreciation) are estimated per year. Purchases of direct materials will be paid during the calendar month following purchase. Fixed costs, direct labor, and variable overhead will be paid as incurred. Inventory of direct materials will be equal to 60 days’ usage. After the first month of operations, 30 days’ usage will be ordered each month.
The general creditors have agreed to reduce their total claims to 60% of their March 31, 1996, balances under the following conditions:
* Existing accounts receivable and inventories are to be liquidated immediately, with the proceeds turned over to the general creditors.
■ The reduced balance of accounts payable is to be paid as cash is generated from future operations, but in no event later than March 31, 1998. No interest will be paid on these obligations.
Under this proposed plan, the general creditors would receive $110,000 more than the current liquidation value of Bixby’s assets. The court has engaged you to determine the feasibility of this plan.
Ignoring any need to borrow and repay short-term funds for working capital purposes, prepare a cash budget for the years ending March 31, 1997 and 1998, showing the cash expected to be available to pay the claims of the general cred¬ itors, payments to general creditors, and the cash remaining after payment of claims.
(CPA)LO1

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Bixby Manufacturing Balance Sheet March 31, 1996 Book Value $100,000 Liquidation Value Assets: Accounts Receivable Inventories $ 50,000 90,000 40,000 Plant Assets (Net) 150,000 160,000 Totals $340,000 $250,000 The liabilities and stockholders' equity of Bixby at this date are Accounts Payable-General Creditors $600,000 Common Stock 60,000 Retained Earnings Deficit (320,000) Total $340,000