Harrys Carryout Stores has eight locations. The firm wishes to expand by two 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 and forecast sales figures:

Actual			Forecast			Additional Information
November	$680,000		January	$760,000		April forecast	$580,000
December	700,000		February	800,000
			March	590,000

Of the firms sales, 45 percent are for cash and the remaining 55 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 25 percent of sales and are purchased and received each month in an amount sufficient to cover the following months expected sales. Materials are paid for in the month after they are received. Labor expense is 50 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15 percent of sales and is paid in the month of sales. Overhead expense is $40,000 in cash per month.

Depreciation expense is $12,400 per month. Taxes of $10,400 will be paid in January, and dividends of $14,000 will be paid in March. Cash at the beginning of January is $128,000, and the minimum desired cash balance is $123,000.

a. Prepare a schedule of monthly cash receipts for January, February, and March.

Harrys Carryout Stores
Cash Receipts Schedule
	November	December	January	February	March
Sales	$680,000	$700,000	$760,000	$800,000	$590,000
Credit sales	374,000	385,000	418,000	440,000	324,500
Cash sales			342,000	360,000	265,500
One month after sale			154,000	167,200	176,000
Two months after sale			224,400	231,000	250,800
Total cash receipts			$720,400	$758,200	$692,300

b. Prepare a schedule of monthly cash payments for January, February, and March.

Harrys Carryout Stores
Cash Payments Schedule
	January	February	March
Payments for purchases
Labor expense
Selling and administrative
Overhead
Taxes
Dividends
Total cash payments	$0	$0	$0

c. Prepare a monthly cash budget with borrowings and repayments for January, February, and March. (Negative amounts should be indicated by a minus sign. Assume the January beginning loan balance is $0.)

Harrys Carryout Stores
Cash Budget
	January	February	March
Total cash receipts
Total cash payments
Net cash flow	0	0	0
Beginning cash balance
Cumulative cash balance	0	0	0
Monthly loan (or repayment)
Ending cash balance	0	0	0
Cumulative loan balance