Chester & Wayne 1) Particulars Cash Budget Cash collection 40% after 2% discount 25% without discount 30% in next month Renting of warehouse Sell of Marketable Securities Bank Borrowing Total Collection less payments 60% of Purchases and other 40% of Purchases and other Equipment Dividend Oct Nov 308,700.00 196,875.00 225,000.00 24,000.00 7,351.00 761,926.00 429,870.60 354,155.00 Dec 324,105.60 206,700.00 236,250.00 340,334.40 217,050.00 206,700.00 192,649.00 29,750.00 989,454.60 53,393.00 817,477.40 452,874.60 286,580.40 250,000.00 470,560.80 301,916.40 45,000.00 Total 973,140.00 620,625.00 667,950.00 24,000.00 200,000.00 83,143.00 2,568,858.00 Supporting Schedules Account Receivable $ 1,012,500 August September October November December January $ $ $ $ $ $ 750,000 787,500 826,800 868,200 911,600 930,000 1,353,306.00 942,651.80 250,000.00 45,000.00 826,800 868,200 911,600 Oct 578,760 151,935 (150,388) 580,307 111,340 24,804 716,451 NOV 607,740 159,530 (151,935) 615,335 113,410 26,046 754,791 Dec 638,120 162,750 (159,530) 641,340 115,580 27,348 784,268 826,800 868,200 911,600 Oct 599,430 157,361 (150,388) 606,403 111,340 24,804 742,547 NOV 629,445 165,228 (151,935) 642,738 113,410 26,046 782,194 Dec 660,910 168,563 (159,530) 669,943 115,580 27,348 812,871 930,000 Purchases an other expenses Total payments Surplus or Deficit Opening Balance Closing Balance 784,025.60 (22,099.60) 142,100.00 120,000.40 989,455.00 (0.40) 120,000.40 120,000.00 817,477.20 0.20 120,000.00 120,000.20 2,590,957.80 (22,099.80) 142,100.00 120,000.20 2 Part a Particulars Cash Budget Cash collection 40% after 2% discount 25% without discount 30% in next month Renting of warehouse Sell of Marketable Securities Bank Borrowing Total Collection less payments 60% of Purchases and other 40% of Purchases and other Equipment Dividend Oct Nov 308,700.00 196,875.00 225,000.00 24,000.00 23,008.00 777,583.00 Dec 324,105.60 206,700.00 236,250.00 340,334.40 217,050.00 206,700.00 176,992.00 72,288.00 1,016,335.60 81,515.00 845,599.40 Total 973,140.00 620,625.00 667,950.00 24,000.00 200,000.00 153,803.00 2,639,518.00 Cost of good sold add ending inventory less beginning inventory Total Purchases Selling and admin Advertising Total to be paid Supporting Schedules Account Receivable August $750,000 September October $826,800 Jan 651,000 1,012,500 September 787,500 November 868,200 December 911,600 445,528.35 354,155.00 469,316.10 297,018.90 250,000.00 487,722.30 312,877.40 45,000.00 1,402,566.75 964,051.30 250,000.00 45,000.00 January 930,000 930,000 Purchases an other expenses Total payments Surplus or Deficit Opening Balance Closing Balance 799,683.35 (22,100.35) 142,100.00 119,999.65 1,016,335.00 119,999.65 119,999.65 845,599.70 (0.30) 120,000.00 119,999.70 NOV 42,538.00 DEC 28,122.00 The borrowing will increase as follows OCT BY - 2,661,618.05 (22,100.65) 142,100.00 119,999.35 Cost of good sold add ending inventory less beginning inventory Total Purchases Selling and admin Advertising Total to be paid b The increase in ending inventory requirement will definitely increase the purchases which will increase the borrowing and therefore to meet increased purchases more fund will be needed. c It is definitely true that any delay in collection will increase the burden on bank borrowing therefore the discount should not be continued, but the final decision should be taken one the borrowing interest rate is concern as the offering more discount will reduce the borrowing burden but the company will have a cost for early payments, if the cost of early payment is less than the cost of borrowing then the early payment should be encouraged otherwise not. Jan 674,250