Problem 16-14

Cash Budgeting

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high. Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,600 per month, and the rent is $2,400 per month. In addition, she must make a tax payment of $14,000 in December. The current cash on hand (on December 1) is $650, but Koehl has agreed to maintain an average bank balance of $4,000 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.) The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $100,000.

	Sales	Purchases
December	$150,000	$40,000
January	50,000	40,000
February	50,000	40,000

Prepare a cash budget for December, January, and February.

I. Collections and Purchases:

	December	January	February
Sales	$150,000	$50,000	$50,000
Purchases	$40,000	$40,000	$40,000
Payments for purchases	$100,000	$40,000	$40,000
Salaries	$4,600	$4,600	$4,600
Rent	$2,400	$2,400	$2,400
Taxes	$14,000
Total payments	$121,000	$47,000	$47,000
Cash at start of forecast	$650	$?	$?
Net cash flow	$29,000	$3,000	$3,000
Cumulative NCF	$29,650	$?	$?
Target cash balance	$4,000	$4,000	$4,000
Surplus cash or loans needed	$25,650	$?	$?

Please, finish and show me all the steps of the boxes with the sign ?