MODULE 6: Larry and Janice have retained an accountant to help them understand their cash position in their projected first year of operations (they plan to open their business on January 1, 2021). The accountant has reviewed their latest projections for 2021 and since they were planning to go ahead with their business he/she was keen to help them prepare a cash budget for the first 6 months of 2021. He/She advised the Martins that it was imperative that they preserve liquidity in this first phase of their business. Several assumptions need to be reflected in the cash budget. Revenues are estimate to be $30,000 per month; it is estimated that 40% of the customers would pay immediately while 60% would pay up between 30 and 60 days. Their COGS is estimated to be $11,000 per month and the accountant suggested that 50% of their COGS should be paid at the time of purchase with the remaining 50% delayed until the next month. Salaries (Sales plus Admin) at $10,000 per month, Lease Costs of $1,083 per month, Advertising of $250 per month, Travel Costs of $167 per month and Financing costs of $833 per month need to be accounted for and paid out in each month. Federal Tax installments during the first six months of the year of $4,000 in March and $5,000 in June also need to be recorded.

Q1: Assuming that CompuTech will begin operations with a Cash Balance of $15,000 on January 1, 2021 please complete a Cash Budget for the Martins to share with their accountant.

Q2: Revised Cash Budget: What impact on the Cash Budget would an increase in COGS were to increase by 30% due to product sourcing problems arising from the pandemic? Further it is estimated that customers may delay their payments resulting in only 20% paying immediately with the remaining 80% carrying over until the second month as AR. Now that you have a better pictue of what might happen on a cash basis: What would the Martins have to plan for if, and what would you recommend?

COGS: 228,000

CompuTech's Income Statement for the year ended, December 31, 2021. Revenue \begin{tabular}{l|c} \hline Sales & 360,000.00 \\ \hline Raw Materials & (132,000.00) \end{tabular} Total Income 228,000.00 Expenses Total Expenses Sales Salaries Advertising Travel Financing Cost Office Lease Depreciation Admin Salary Income Before Taxes Income Tax Net Income 42,000.0022,000.0020,000.00