Carmel Corp.

Forecasted Cash Budget

July 31, 2020

The Carmel Corporation's projected sales for the first eight months of 2020 are as follows:

January $100,000

February 110,000

March 130,000

April 250,000

May $275,000

June 250,000

July 235,000

August 160,000

Of Carmel's sales, 20% are for cash, 60% are collected in the month follow the month of sale, and the remainder are collected in the second month following the month of sale. November and December sales for 2019 were $220,000 and $175,000 respectively.

Carmel purchases its raw materials two months in advance of its sales equal to 70% of its final sales price. The supplier is paid one month after it makes delivery. For example, purchases for April sales are made in February, and payment is made in March.

In addition, Carmel pays $10,000 per month for rent and $20,000 per month for other expenditures. Tax prepayments of $23,000 are made each quarter beginning in March.

The Company's cash balance at December 31, 2019 was $22,000. As part of the Company's loan covenant, a minimum cash balance of $20,000 must be maintained at all times.

Assume that any short-term financing needed to maintain the minimum cash balance will be paid off in the month following the month of financing if sufficient funds are available. Interest on short term loans (12%) is paid monthly. Borrowing to meet monthly cash needs takes place at the beginning of the month. Thus, if in the month of April, Carmel expects to have a need for an additional $60,500, these funds will be borrowed at the beginning of April with interest of $605 (.12 X .5 X $60,500) owed for April and paid at the end of May.

1. make a cash budget for Carmel covering the first 7 months of 2020.
2. Carmel has $250,000 in notes payable due in July that must be repaid or renegotiated for
3. extension. Will Carmel have ample cash to repay the notes?