6. Cash budget Aa Aa Jamison Company's financial managers are meeting with the company's bank to renew their line of credit and discuss their investment needs. They have prepared the company's operating cash budget for the last six months of the year. The following budget assumptions were used to construct the budget: Jamison's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Jamison's sales are made on credit with terms of 2/10, net 30. Jamison's experience is that 25% is collected from customers who take advantage of the discount, 65 % is collected in the second month, and the last 10 % is collected in the third month after the sale. The budget assumes that there are no bad debts. The cost of materials averages 45 % of Jamison's finished product. The purchases are generally made one month in advance of the sale, and Jamison pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,210 million, then purchases during June would be $545 ($1,210 million x 0.45), and this amount would be paid in July. Other cash expenses include wages and salaries at 17 % of sales, monthly rent of $44 million, and other expenses at 5 % of sales. Estimated tax payments of $64 million and $67 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,100 million payment for a new plant must be made in September. Assume that Jamison's targeted cash balance is $300, and the estimated cash on hand on July 1 is $295 Use the preceding information to fill in the missing amounts in the following cash budget. Assignment 15-Working Capital Management Jamison Company Cash Budget For the Six Months Ended December 31, Year 1 (smillions) May December June July August September October November Credit sales $1,045 $1,078 $1,111 $1,133 $1,210 $1,100 $1,155 $1,188 Credit purchases 495 510 520 535 545 December July September October November August Cash receipts Collections from this month's sales 272 278 283 291 296 Collections from previous month's sales 772 715 722 736 751 Collections from sales two months previously 111 113 116 108 110 Total cash receipts $1,095 $1,110 $1,130 $1,155 $1,184 Cash disbursements Payments for credit purchases 495 500 510 535 545 Wages and salaries 187 189 193 202 206 Rent 44 44 44 44 44 Other expenses 55 56 57 59 61 s 64 Payment for plant construction 1,100 Total cash disbursements s845 $1,904 $789 $840 s856 Net cash fow (Receipts- disbursements) $231 $306 $794 $245 $315 $328 Beginning cash balance 295 526 832 38 283 598 Ending cash balance Target (minimum) cash balance $526 s032 $283 $598 $926 300 300 300 300 300 Surplus (shortfail) cash $532 $226 -$17 $290 $626 Use the information provided in the budget to complete the following sentences Jamison Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Jamison will to end the year with a cash of s and a cash of s to cover the month with the greatest shortfal, and the financial managers can tell the bank Jamison Company will want a credit line of at least s to expect that they will be able to invest up tos in short-term marketable securities