Recently Joeey Bidenless the owner of Not Trump Again Inc. has been looking at his books and realizes he needs help. Joeey has hired a recent graduate at a local university in accounting and wants Muchie Faucciie to prepare a cash budget for January. After examining the company’s records, you find the following:

a) Cash balance on January 1st is $13,450.

b) Actual sales for November and December are as follows:

November December

Cash sales $35,000 $45,000

Credit sales $55,000 $85,000

Total sales $90,000 $130,000

c) Credit sales are collected over a 3-month period as follows:

i) 50% in the month of sale

ii) 30% in the second month

iii) 15% in the third month

The sales collected in the third month are subject to a 1.25% late fee, but only half of the affected customers pay the late fee, and the owner does not think it is worthwhile to try to collect from the other half. The remaining sales are uncollectible.

d) Inventory purchases average 60% of a month’s total sales. Of these purchases, 40% are paid in the month of purchase. The remaining 60% are paid for in the following month.

e) Salaries and wages are $54,700 a month including a salary of $15,000 paid to the owner.

f) Rent is $3,200 per month.

g) Taxes to be paid in January are $3,500.

The owner also tells you that he expects cash sales of $32,000 and credit sales of $76,000 for January. No minimum cash balance is required. The owner does not have any short-term loans.

a) Prepare a cash collection schedule, cash payment schedule and a cash budget for January.

b) Does, Not Trump Again Inc. have sufficient cash for the month of January? Regardless, if the company has sufficient cash, what steps should the owner take in the event of a negative cash balance situation?