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	$500,000		January	$580,000		April forecast	$630,000
December	520,000		February	620,000
			March	640,000

Of the firm's sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 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 50 percent of sales and is paid in the month of sales. Selling and administrative expense is 6 percent of sales and is also paid in the month of sales. Overhead is $36,500 in cash per month; amortization expense is $11,500 per month. Taxes of $9,400 will be paid in January and dividends of $3,000 will be paid in March. Cash at the beginning of January is $110,000 and the minimum desired cash balance is $105,000.

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	$	$	$