Eugene Brewing Company is budgeting for the next year. The following is the companys beginning balance sheet:

EUGENE BREWING COMPANY BALANCE SHEET 12/31/2020
Assets Cash $ 160,000 Accounts receivable 120,000 Inventory 160,000 Total current assets $ 440,000 Fixed assets 880,000 Accumulated depreciation (300,000) Total Fixed Assets Net 580,000 Total Assets $1,020,000	Liabilities and Equities Accounts payable $ 200,000 Long-term debt 350,000 Total liabilities $ 550,000 Common stock at par $ 150,000 Additional paid-in 150,000 Retained earnings 170,000 Total Equity 470,000 Total liabilities and equities $1,020,000

The company expects to collect the beginning balance of accounts receivable in January. In general, 40% of the companys sales are on a cash basis. Of the credit sales, 40% are paid in the following month, and 60% are paid in the second month after the sale.

The accounts payable at the beginning of the year must be paid in January. All materials are purchased on credit and paid for in the following month.

The long-term debt has an annual interest rate of 12%. Interest payments of 1% of the principal are made each month. The long-term debt is not due for another five years.

Eugene Brewing Company makes two different types of beer, an ale and a porter. The ale is a lighter beer that requires fewer ingredients than does the darker and heavier porter. The input requirements for a case of beer for each type of beer is as follow:

For Making Ale
Material	Quantity per case	Cost
Hops	5 lb.	$0.50/lb.
Yeast	1 oz.	0.20/oz.
Sugar	0.5 lb.	0.40/lb.
Bottles	24	0.20/bottle

For Making Porter
Material	Quantity per case	Cost
Hops	10 lb.	$0.50/lb.
Yeast	1 oz.	0.20/oz.
Sugar	0.8 lb.	0.40/lb.
Bottles	24	0.20/bottle

The labor to make a case of beer is the same for each type of beer, 0.20 hours at $20/hour. Labor is paid in the month earned. Monthly overhead expenses are paid in the month incurred and expected to be as follows:

Electricity $ 75,000

Administrative 115,000

Indirect labor 65,000

Rent 70,000

Depreciation 80,000

Ale sells for $25 per case, and porter sells for $30 per case. Estimated sales (in cases) for Eugene Brewing to be as follows:

Month Cases Ale Cases Porter
January	18,000	24,000
February	19,000	26,000
March	25,000	28,000
April	24,000	30,000

The beginning inventory includes 13,000 cases of ale and 12,000 cases of porter. The company prefers to have inventory at the end of each month equal to the expected sales in the next month. Eugene Brewing uses a first-in, first-out (FIFO) method of costing inventory. The company must buy a new bottling machine for $480,000 at the end of January.

a. Estimate cash flows in each of the months.

b. Does the company need to borrow money in any of the months?

c. Make a balance sheet as of the end of March and an income statement for the first three months. Assume that the company borrows cash at an interest rate of 1% per month to make up any shortage of cash.