Cash Forecast Test #1 At December 31, the balance sheet of Fairouze Malting Company was the following (in thousands): Cash Accounts receivable Inventories P50 Accounts payable 530 Accrued expenses 545 Bank loan P360 212 400 Current assets P1,125 Current liabilities P972 Long-term debt 450 Net fixed assets 1,836 | Common stock 100 Retained earnings 1,439 Total Assets P2.961 Total liabilities & P2.961 equity The company has received a large order and anticipates the need to go to its bank to increase its borrowings. As a result, it needs to forecast its cash requirements for January, February, and March of the following year. Typically, the company collects 20% of its sales in the month of sale, 70% in the subsequent month, and 10% in the second month after the sale. All sales are on credit. Purchases of raw materials to produce malt are made in the month prior to the sale and amount to 60% of sales in the subsequent month. Payments for these purchases occur in the month after the purchase. Labor costs, including overtime, are expected to be $150,000 in January, P200,000 in February, and P160,000 in March. Selling, administrative, tax, and other expenses are expected to be $100,000 per month for January through March. Actual sales in November and December and projected sales for January through April are as follows (in thousands): November December January P500 February 600 March 600 April P1,000 650 7 50 1 On the basis of the above information: a. Prepare a cash budget for the months of January, February, and March. b. Determine the amount of additional bank borrowings necessary to maintain a cash balance of P50,000 at all times. (Ignore interest on such borrowings). c. Prepare a forecast balance sheet for March 31. (It should be noted that the company maintains a safety stock of inventory and that depreciation for the three-month period is expected to be P24,000)