For the Six Months Ended December 31, Year 1 ($ millions) October May $1,045 June $1,078 495 Credit sales Credit purchases July $1,100 August $1,111 510 September $1,133 520 December $1,210 November $1,188 545 $1,155 535 July August September October November December 163 825 108 167 833 110 170 850 111 $1,131 175 866 113 $1,154 178 891 116 $1,185 $1,096 $1,110 495 176 500 178 44 510 181 44 535 190 44 545 194 Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously Total cash receipts Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash 56 57 59 61 55 64 1,100 $1,892 5834 $778 $828 $844 $242 307 $318 549 - $782 867 $257 85 $326 342 $549 300 $249 $867 300 $342 300 $668 300 $341 668 $1,009 300 $709 $567 $42 5368 Use the information provided in the budget to complete the following sentences. Henderson Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Henderson will $ to end the year with a cash of and a cash of $ Henderson Company will want a credit line of at least to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ In short-term marketable securities, The following budget assumptions were used to construct the budget: Henderson's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Henderson's sales are made on credit with terms of 2/10, net 30. Henderson's experience is that 15% is collected from customers who take advantage of the discount, 75% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts. The cost of materials averages 45% of Henderson's finished product. The purchases are generally made one month in advance of the sale, and Henderson pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,210 million, then purchases during June would be $545 ($1,210 million x 0.45), and this amount would be paid in July. . Other cash expenses include wages and salaries at 16% of sales, monthly rent of $44 million, and other expenses at 5% of sales. Estimated tax payments of $64 million and $67 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,100 million payment for a new plant must be made in September Assume that Henderson's targeted cash balance is $300, and the estimated cash on hand on July 1 is $307 For the Six Months Ended December 31, Year 1 ($ millions) October May $1,045 June $1,078 495 Credit sales Credit purchases July $1,100 August $1,111 510 September $1,133 520 December $1,210 November $1,188 545 $1,155 535 July August September October November December 163 825 108 167 833 110 170 850 111 $1,131 175 866 113 $1,154 178 891 116 $1,185 $1,096 $1,110 495 176 500 178 44 510 181 44 535 190 44 545 194 Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously Total cash receipts Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash 56 57 59 61 55 64 1,100 $1,892 5834 $778 $828 $844 $242 307 $318 549 - $782 867 $257 85 $326 342 $549 300 $249 $867 300 $342 300 $668 300 $341 668 $1,009 300 $709 $567 $42 5368 Use the information provided in the budget to complete the following sentences. Henderson Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Henderson will $ to end the year with a cash of and a cash of $ Henderson Company will want a credit line of at least to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ In short-term marketable securities, The following budget assumptions were used to construct the budget: Henderson's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Henderson's sales are made on credit with terms of 2/10, net 30. Henderson's experience is that 15% is collected from customers who take advantage of the discount, 75% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts. The cost of materials averages 45% of Henderson's finished product. The purchases are generally made one month in advance of the sale, and Henderson pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,210 million, then purchases during June would be $545 ($1,210 million x 0.45), and this amount would be paid in July. . Other cash expenses include wages and salaries at 16% of sales, monthly rent of $44 million, and other expenses at 5% of sales. Estimated tax payments of $64 million and $67 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,100 million payment for a new plant must be made in September Assume that Henderson's targeted cash balance is $300, and the estimated cash on hand on July 1 is $307