Problem 4-25 Complete cash budget [LO2]

Harry's Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:

Actual			Forecast			Additional Information
November	$ 300,000		January	$ 480,000		April forecast	$ 440,000
December	420,000		February	520,000
			March	450,000

Of the firm's sales, 35 percent are for cash and the remaining 65 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 40 percent of sales and are purchased and received each month in an amount sufficient to cover the following month's expected sales. Materials are paid for in the month after they are received. Labor expense is 30 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15 percent of sales and is also paid in the month of sales. Overhead expense is $33,000 in cash per month.

Depreciation expense is $11,000 per month. Taxes of $9,000 will be paid in January, and dividends of $7,000 will be paid in March. Cash at the beginning of January is $100,000, and the minimum desired cash balance is $95,000.

(a)	Prepare a schedule of monthly cash receipts for January, February and March. (Omit the "$" sign in your response.)

HARRYS CARRY-OUT STORES Cash Receipts Schedule
	November	December	January	February	March	April
Sales
Cash sales
Credit 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. (Omit the "$" sign in your response.)

HARRYS CARRY-OUT STORES Cash Payments Schedule
	January	February	March
Payments for purchases
Labor expense
Selling and admin. exp.
Overhead
Taxes
Dividends
Total cash payments

(c)	Prepare a schedule of monthly cash budget with borrowings and repayments for January, February and March. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

HARRYS CARRY-OUT STORES 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