(Preparation of a cash budget) The Sharpe Corporations projected sales for the first eight months of 2014 are as follows: (Data Table) January 89,200; Feburary 120,700; March 134,200; April 241,000; May 300,100; June 269,600; July 224,400; August 150,100

Of Sharpe's sales, 10% is for cash, another 60% is collected in the month following the sale, and 30% is collected in the second month following the sale. November and December sales for 2013 were $219,200 and $175,500 respectively. Sharpe purchases it raw materials two months in advance of its sales equal to 60% of their final sales price. The supplier is paid one month after it makes delivery. For example, purchases for April sales are made in February and payment is made in March. In addition, Sharpe pays $9,600 per month for rent and $20,400 each month for other expenditures. Tax repayments of $22,400 are made each quarter, beginning in March. The company's cash balance at December 31, 2013 was $23,000; a minimum balance of $15,000 must be maintained at all times. Assume that any short-term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short-term loans (12%) is paid monthly. Borrowing to meet estimated monthly cash needs take place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $63,050, these funds will be borrowed at the beginning of April with interest of $604 (i.e., 0.12 x 1 / 12 x 63,050) owed for April being paid at the beginning of May.

a. Prepare a cash budget for Sharpe covering the first seven months of 2014.

b. Sharpe has $200,600 in notes payable due in July that must be repaid or renegotiated for an extension. Will he firm have sufficient cash to repay the notes?

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A. Prepare a cash budget for Sharpe covering the first seven months of 2014.

Complete (month by month) the cash budget below: (round to the nearest dollar)

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Nov Dec Jan

Sales_________________________$219,200_______$175,500______$89,200______________

Cash Receipts

Sales For cash (10%) $____________

First month after (60%) $____________

Second month sales (30%) $____________

Total Cash Receipts $____________

Cash disbursements

Raw materials $____________

Rent $____________

Other expenditures $____________

Tax prepayments $____________

Total Cash Disbursements $___________

Net change in Cash

Net change in cash for period $__________

(+) Beginning cash balance $____________

(-) Interest on short-term borrowing $____________

(-) Short-term borrowing repayments $___________

(=) Ending cash balance b/ borrowing $____________

New Financing Needed

Financing needed for period $____________

Ending cash balance $ 23,000 $____________

Cumulative borrowing $____________