Harry's 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 firm's 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 month's 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. Answer is complete and correct. January March Sales Credit sales Harry's Carryout Stores Cash Receipts Schedule November December $ 680,000 $ 700,000 $ 760,000 $ 374,000 385,000 418,000 342,000 154,000 224,400 $ 720,400 $ Cash sales One month after sale Two months after sale Total cash receipts February 800,000 $ 440,000 360,000 167,200 231,000 758,200 $ 590.000 324,500 265,500 176,000 250.800 692,300 b. Prepare a schedule of monthly cash payments for January, February, and March. Answer is complete but not entirely correct. March Payments for purchases Labor expense Selling and administrative Overhead Harry's Carryout Stores Cash Payments Schedule January February $ 175,000 $ 190,000 X $ 380,000 400,000 114,000 120,000 40,000 40,000 10,400 0 0 0 $ 719,400 $ 750,000 $ 200,000 X 295,000 88,500 40,000 Taxes Dividends Total cash payments 0 14,000 637,500 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.) X Answer is complete but not entirely correct. 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 Harry's Carryout Stores Cash Budget January February $ 720,400$ 758,200 $ 719,400 750,000 X 1,439,800 1,508,200 128,000 129,000 X 1,567,800 1,637,200 0 X 0 % 1,567,800 1,637,200 0 X 0 X March 692,300 637,500 X 1,329,800 137,200 X 1,467,000 0 X 1,467,000 0