Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr. Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures:

Actual Forecast Additional Information November $300,000 January $380,000 April forecast $430,000 December 320,000 February 420,000 March 440,000

Of the firm's sales, 30 percent are for cash and the remaining 70 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 30 percent of sales and are purchased and received each month in an amount sufficient to cover the current months expected sales. Materials are paid for in the month they are received. Labour expense is 40 percent of sales and is paid in the month of sales. Selling and administrative expense is 8 percent of sales and is also paid in the month of sales. Overhead is $30,500 in cash per month; amortization expense is $10,500 per month. Taxes of $8,500 will be paid in January and dividends of $4,500 will be paid in March. Cash at the beginning of January is $90,000 and the minimum desired cash balance is $85,000.

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

Jim Daniels Health Products Cash Receipts Schedule November December January February March April Sales $ $ $ $ $ $ Credit sales Cash sales Collections in the month after credit sales Collections two months after credit sales Total cash receipts $ $ $

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

Jim Daniels Health Products Cash Payments Schedule January February March Payments for purchases $ $ $ Labour expense Selling and administrative expense Overhead Taxes Dividends Total cash payments $ $ $

c. Prepare a schedule of monthly cash budget with borrowings and repayments for January, February and March. (Do not leave any empty spaces; input a 0 wherever it is required. Negative answers and amounts to be deducted should be indicated by a minus sign.)

Jim Daniels Health Products Cash Budget January February March Total cash receipts $ $ $ Total cash payments Net cash flow Beginning cash balance Cumulative cash balance Monthly loan or (repayment) Cumulative loan balance Ending cash balance $ $ $