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
Nov	$640000	Jan	$720000	April forecast	$560000
Dec	660000	Feb	760000
		Mar	750000

Of the firms sales, 50 percent are for cash and the remaining 50 percent are on credit. Of credit sales, 20 percent are paid in the month after sale and 80 percent are paid in the second month after the sale. Materials cost 40 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 30 percent of sales and is paid for in the month of sales. Selling and administrative expense is 20 percent of sales and is paid in the month of sales. Overhead expense is $33,000 in cash per month.

Depreciation expense is $12,200 per month. Taxes of $10,200 will be paid in January, and dividends of $13,000 will be paid in March. Cash at the beginning of January is $124,000, and the minimum desired cash balance is $119,000.

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

Cash Receipts Schedule

	November	December	January	February	March
Sales
Credit Sales
Cash Sales
One Month after sale
Two Month s after sale
Total cash receipts

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

	January	February	March
Payments for purchases
Labor Expense
Selling and administrative
Overhead
Taxes
Dividends
Total cash payments

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.)

	January	February	March
Total cash receipts
Total cash payments
Net cash flow
Beginning cash balance
Cumulative cash balance
Monthly loan (or repayment)
Ending cash balance
Cumulative Loan Balance