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(Preparation of a cash budget) The Sharpe Corporation's projected sales for the first eight months of 2014 are as follows: B. Of Sharpe's sales, 10 percent is for cash, another 60 percent is collected in the month following the sale, and 30 percent is collected in the second month following the sale. November and December sales for 2013 were $220,100 and $174,000, respectively. Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent 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 $9,300 per month for rent and $19,700 each month for other expenditures. Tax prepayments of $23,000 are made each quarter, beginning in March. The company's cash balance at December 31, 2013, was $22,800; 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 (11 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $57,110, these funds would be borrowed at the beginning of April with interest of $524 (i.e., 0.11 x 1/12 x 57,110) 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 $199,900 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have sufficient cash to repay the notes? January February March April $89,600 120,900 134,400 240,000 May June July August $299,900 269,300 225,700 150,800 Complete (month by month) the cash budget below: (Round to the nearest dollar.) NOV JAN NOV 220,100 $ DEC 174,000 $ Sales $ 89,600 Cash Receipts Sales for cash (10%) First month after sales (60%) Second month after sales (30%) Total Cash Receipts GA GA GA GA Cash disbursements Raw materials Rent GA GA GA Other expenditures 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 Cumulative borrowing $ 22,800 $ (Preparation of a cash budget) The Sharpe Corporation's projected sales for the first eight months of 2014 are as follows: B. Of Sharpe's sales, 10 percent is for cash, another 60 percent is collected in the month following the sale, and 30 percent is collected in the second month following the sale. November and December sales for 2013 were $220,100 and $174,000, respectively. Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent 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 $9,300 per month for rent and $19,700 each month for other expenditures. Tax prepayments of $23,000 are made each quarter, beginning in March. The company's cash balance at December 31, 2013, was $22,800; 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 (11 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $57,110, these funds would be borrowed at the beginning of April with interest of $524 (i.e., 0.11 x 1/12 x 57,110) 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 $199,900 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have sufficient cash to repay the notes? January February March April $89,600 120,900 134,400 240,000 May June July August $299,900 269,300 225,700 150,800 Complete (month by month) the cash budget below: (Round to the nearest dollar.) NOV JAN NOV 220,100 $ DEC 174,000 $ Sales $ 89,600 Cash Receipts Sales for cash (10%) First month after sales (60%) Second month after sales (30%) Total Cash Receipts GA GA GA GA Cash disbursements Raw materials Rent GA GA GA Other expenditures 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 Cumulative borrowing $ 22,800 $