Cash Budgeting
My Home Week 8: Homework X Cash Budgeting Courses 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 Catalog and Study Tools 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 $1,800 per month. In addition, she A-Z Partner Offers must make a tax payment of $14,000 in December. The current cash on hand (on December 1) is $750, but Koehl has agreed to maintain an average bank balance of $5,000 - 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.) Rental Options The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $160,000. College Success Tips Sales Purchases December $170,000 $40,000 January 38,000 40,000 Career Success Tips February 66,000 40,000 Help a. 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. N Give Feedback Collections and Purchases: December January February Sales (Collections) 66,000 170,000 38,000 Purchases 40,000 40,000 40,000 S Payments for purchases S 40,000 160,000 40,000 Salaries 5,000 5,000 5,000 Rent 1,800 A+ 1,800 1,800 Taxes 14,000 Total payments 180,800 0 46,800 0 46,800My Home Week 8: Homework X Courses Rent 1,800 1,800 1,800 Catalog and Study Tools Taxes 14,000 A-Z Partner Offers Total payments 46,800 180,800 46,800 Rental Options Cash at start of forecast T College Success Tips 750 0 Net cash flow 19,200 Career Success Tips -10,800 8,800 ? Help Cumulative cash balance 24,200 X -10,050 -3,800 X N Give Feedback Target cash balance 5,000 5,000 5,000 Surplus cash or loans needed 19,200 X -15,050 8,800 b. 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. Hide Feedback Partially Correct A+ Check My Work O- Icon Key
