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	$620,000		January	$700,000		April forecast	$550,000
December	640,000		February	740,000
			March	560,000

Of the firms sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 35 percent are paid in the month after sale and 65 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 $22,000 in cash per month.

Depreciation expense is $12,100 per month. Taxes of $10,100 will be paid in January, and dividends of $12,500 will be paid in March. Cash at the beginning of January is $122,000, and the minimum desired cash balance is $117,000.

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
Credit sales
Cash sales
One month after sale
Two months after sale
Total cash receipts

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

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

StoresCash

BudgetJanuaryFebruaryMarchTotal

cash receiptsTotal

cash payments

Net cash flow

Beginning cash balance

Cumulative cash balance

Monthly loan (or repayment)

Ending cash balance

Cumulative loan balance