2. Alico Inc. is in the gym business and has a number gyms in different cities.

It is the end of the fiscal year and you have been asked of by the CEO to develop a cash budget for the first 3 months of the new fiscal year.

The actual results for Alico Inc. during the last 3 months are given below:

	OCT	NOV	DEC
REVENUE	$1,00,000	935,000	$900,000
ACCTS. PAY.	350,000	360,000	270,000
WAGES	250,000	255,000	245,000
RENT	50,000	50,000	50,000
UTILITIES	25,000	30,000	31,000
MAINT.	35,000	38,000	30,000
DEPRECIATION	10,000	10,000	10,000
INSURANCE EXP	15,500	15,500	15,500

The budget for the next 3 months is as follows:

	JAN	FEB	MAR
SALES	$ 955,000	$920,000	$1,050,000
ACCTS. PAY.	250,000	230,000	280,000
WAGES	265,000	260,000	245,000
RENT	55,000	55,000	55,000
UTILITIES	40,000	35,000	30,000
MAINT.	32,000	31,500	32,000
DEPRECIATION	10,000	12,000	12,000
INSURANCE EXP	16,000	16,000	16,000

The credit department has developed a profile of how customers pay their bills based on the standard terms Alico Inc. offers of net 30 days. 90% of all receivables are paid after 30 days. 94% of all receivables are paid after 60 days and 97% are paid after 90 days. Accounts payable are paid 30 days after they are received. All other expenses are paid in the month in which they are incurred.

In January, Alico plans to buy 25 new Elliptical exercise machines for $3,900 each including installation and set up. The company plans to finance the Ellipticals using a $500,000 letter of credit it has established with their bank. The terms of the letter of credit require that Alico pay off as much as it can on the loan monthly. The annual interest rate is 10% payable monthly on the outstanding balance. The first payment will be in February.

The company wants to keep $145,000 in cash at the beginning of each month. At the end of Dec. $150,000 was in the cash account.

Required: A. Develop a cash budget for Jan., and Feb. Use the form provided.