Cash Budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $5,000 per month, and the rent is $2,200 per month. In addition, she must make a tax payment of $13,000 in December. The current cash on hand (on December 1) is $350, but Koehl has agreed to maintain an average bank balance of $5,500 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $160,000.

	Sales		Purchases
December	$170,000		$45,000
January	38,000		45,000
February	50,000		45,000

Prepare a cash budget for December, January, and February. Do not round intermediate calculations. Round your answers to the nearest dollar. Negative values, if any, should be indicated by a minus sign.

Collection and Purchases:

Sales Dec Jan Feb

170,0000 38,000 50,0000

Purchases 45,000 45,000 45,0000

Payment for Purchases 160,000 ______ _______

Salaries 5,000 5,000 5,000

Rent 2,200 2,200 2,200

Taxes 13,000 _______ ________

Total Payments _______ ________ _________

Cash at start of forecast ______________

Net Cash Flow___________ ______________ _______________

Cumulative Cash Balance ___________ ____________ ____________

Target Cash balance ____________ _______________ ______________

Surplus cash or loans needed ______________ ___________________ ___________________

Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.) Do not round intermediate calculations. Round your answer to the nearest dollar.