Dorothy Koehl recently leased space in the Southside Malt and opened a new business, Koeht's Doll Shop. Business has been good, but Kochi 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 just how much she must 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 $4,100 per month, and the rent is $3,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $500, 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 Koeht 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 $140,000 Sales $130,000 $25,000 Purchases December January 30,000 25,000 February 58,000 25,000 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. a. Prepare a cash budget for December, January, and February. Use a minus sign to enter negative values for net cash flows, cumulative NCF values, and loans needed, if any. If the answer is zero, enter "o". Do not round intermediate calculations. Round your answers to the nearest dollar. Collections and Purchases December January February $ $ $ $ Sales $ Purchases $ Payments for purchases $ Salaries $ $ $ $ $ Rent $ $ $ Taxes $ Total payments $ $ Cash at start of forecast $ Net cash flow $ $ $ Cumulative NCF $ I $ $ $ Numeric field $ $ Target cash balance Surplus cash or loans needed $ $ b. Suppose 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 question are minimal.) Use a minus sign to enter a negative value for loan requirements. Do not round Intermediate calculations. Round your answer to the nearest dollar B C D F G H 4 $4,100 $3,000 $12,000 $500 $5,500 $140,000 $130,000 $25,000 $30,000 $25,000 $58,000 $25,000 December January February $130,000 $30,000 $58,000 A 1 Cash Budgeting 2 3 Monthly salary Monthly rent 5 December tax payment 6 Current cash on hand, December 1 7 Target cash balance 8 November purchases 9 December sales 10 December purchases 11 January sales 12 January purchases 13 February sales 14 February purchases 15 16 Cash Budget: 17 Sales (Collections) 18 19 Purchases 20 21 Payments: 22 For purchases 23 Salary 24 Rent 25 Taxes 26 Total payments 27 28 Cash at start of forecast 29 Net cash flow 30 Cumulative NCF 31 Target cash balance 32 Surplus cash or loans needed 33 34 Suppose firm solls on credit: 35 Number of days customers have to pay 36 Company loan requirements on December 31 37 38 39 $25,000 $25,000 $25,000 Formulas #N/A #N/A #N/A $4,100 $3,000 $12,000 $4,100 $3,000 $4,100 $3,000 #N/A #N/A #N/A $500 #N/A #N/A #N/A WNA #N/A $5,500 $5,500 $5,500 #N/A #N/A N/A 30 #N/A 40
