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Jamison Company's financial managers are meeting with the company's bank to renew their line of credit and discuss their investment needs. They have prepared the company's operating cash budget for the last six months of the year. The following budget assumptions were used to construct the budget: Jamison's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Jamison's sales are made on credit with terms of 2/10, net 30. Jamison's experience is that 25% is collected from customers who take advantage of the discount, 65% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts The cost of materials averages 45% of Jamison's finished product. The purchases are generally made one month in advance of the sate, and Jamison pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,320 million, then purchases during June would be $594 ($1,320 million x 0.45), and this amount would be paid in July Other cash expenses include wages and salaries at 20% of sales, monthly rent of $48 million, and other expenses at 5% of sales. Estimated tax payments of $70 million and $73 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,200 milion payment for a new plant must be made in September Assume that Jamison's targeted cash balance is $300, and the estimated cash on hand on July 1 is $280. Jamison Company Cash Budget For the Six Months Ended December 31, Year 1 ($ millions) May $1,140 June $1,176 540 July $1,200 Credit sales Credit purchases August September $1,212 $1,236 556 567 October $1,260 583 November $1,296 594 December $1,320 July August September October November December 303 318 Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously Total cash receipts 297 780 118 $1,195 788 120 309 903 121 $1,233 819 124 323 842 126 $1,211 $1,261 $1,291 540 240 48 60 70 545 242 48 594 264 556 247 48 62 583 259 48 65 48 66 61 Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash 1,200 $2,113 $958 $896 $955 $972 -$902 793 $319 420 $214 280 $494 300 $194 $299 494 $793 300 $493 $230 -109 $121 300 $306 12: $427 300 $246 300 -$179 $127 $446 Use the information provided in the budget to complete the following sentences. Jamison Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the fast six months of the year, Jamison will to end the year with a cash of and a cash of Jamison Company will want a credit line of at least $ to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ in short-term marketable securities Jamison Company's financial managers are meeting with the company's bank to renew their line of credit and discuss their investment needs. They have prepared the company's operating cash budget for the last six months of the year. The following budget assumptions were used to construct the budget: Jamison's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Jamison's sales are made on credit with terms of 2/10, net 30. Jamison's experience is that 25% is collected from customers who take advantage of the discount, 65% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts The cost of materials averages 45% of Jamison's finished product. The purchases are generally made one month in advance of the sate, and Jamison pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,320 million, then purchases during June would be $594 ($1,320 million x 0.45), and this amount would be paid in July Other cash expenses include wages and salaries at 20% of sales, monthly rent of $48 million, and other expenses at 5% of sales. Estimated tax payments of $70 million and $73 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,200 milion payment for a new plant must be made in September Assume that Jamison's targeted cash balance is $300, and the estimated cash on hand on July 1 is $280. Jamison Company Cash Budget For the Six Months Ended December 31, Year 1 ($ millions) May $1,140 June $1,176 540 July $1,200 Credit sales Credit purchases August September $1,212 $1,236 556 567 October $1,260 583 November $1,296 594 December $1,320 July August September October November December 303 318 Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously Total cash receipts 297 780 118 $1,195 788 120 309 903 121 $1,233 819 124 323 842 126 $1,211 $1,261 $1,291 540 240 48 60 70 545 242 48 594 264 556 247 48 62 583 259 48 65 48 66 61 Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash 1,200 $2,113 $958 $896 $955 $972 -$902 793 $319 420 $214 280 $494 300 $194 $299 494 $793 300 $493 $230 -109 $121 300 $306 12: $427 300 $246 300 -$179 $127 $446 Use the information provided in the budget to complete the following sentences. Jamison Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the fast six months of the year, Jamison will to end the year with a cash of and a cash of Jamison Company will want a credit line of at least $ to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ in short-term marketable securities