ch4.1

Harry's Carryout Stores has eight locations. The firm wishes to expand by more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual end forecast sales figures: E40,ooo Elo, ooo Of the firm's sales, 50 percent ere for cash and the remaining 50 percent ere on credit Of credit sales, 50 percent ere paid in the month after sale and SO percent are peid in the second month after the sale. Materials cost 40 percent of seles and ere purchased and received each month in an emount sufficient to cover the following month's expected sales. Materials ore paid for in the month after they ore received. Labor expense is 30 percent of sales and is paid for in the month of sales. Selling and administrative expense is 20 percent of sales and is paid in the month of sales. Overhead expense is $36,000 in cash per month. Depreciation expense is $11,600 per month. Taxes of $9,600 will be paid in January, end dividends of $10,000 will be paid in Merch. Cash at the beginning of January is $112,000, and the minimum desired cash balance is S107,OOO. e. Prepare e schedule of monthly cash receipts for January, February, and Merch. Harry's Carryout Stores Cash Receipts Schedule November December Sales Credit sales Cash sales One month after sale Two months after sale Total cash receipts January February March b. Prepare a schedule of monthly cash payments for January, February, and March. Harry's Carryout Stores Cash Payments Schedule January Payments for purchases Labor expense Selling and administrative Overhead Taxes Dividends Total cash payments February March c. Prepare a monthly cash budget with borrowings and repayments for January, February, and March. (Negative amounts should be indicated by minus sign. Assume the January beginning loan belence is SO.) Harry's Carryout Stores Cash Budget January Total cash receipts Total cash payments Net cash flow Beginning cash balance Cumulative cash balance Monthly loan (or repayment) Ending cash balance Cumulative loan balance February March