You have been engaged as a consultant to design a master budget model and then to assist Helping Hand Corp. in making some management decisions based on that master budget.

Helping Hand is a small, rapidly growing wholesaler of consumer electronic products.The company's main product lines are small kitchen appliances and power tools.The marketing manager has recently completed a sales forecast.She believes the company's sales will increase by 1 percent each month over the previous month's sales from December 2018 through March 2019.Then sales are expected to remain constant for several months.Helping Hand's projected balance sheet as of December 31, 2018 is as follows:

Cash $ 60,000

Accounts receivable 172,530

Marketable securities 10,000

Inventory 39,784

Buildings and equipment (net of accumulated depreciation) 600,000

Total assets $ 882,314

Accounts payable $ 111,940

Sales commissions payable 4,040

Bond interest payable 8,000

Property taxes payable 0

Bonds payable (4%; due in 2022) 600,000

Common stock 100,000

Retained earnings 58,334

Total liabilities and stockholders' equity $882,314

The following information has been accumulated to assist with preparing the master budget for the first quarter of 2019:

1) Projected sales for November 2018 are $200,000.Credit sales are typically 90% of total sales.Helping Hand's credit experience indicates that 13% of credit sales are collected during the month of sale, 75% in the month following the sale, and 10% in the second month following the sale.Experience shows the remaining credit sales are uncollectible.

2) Helping Hand's cost of goods sold generally runs at 65% of sales.Inventory is purchased on account and 15% of each month's purchases are paid during the month of purchase.The remainder is paid during the following month.In order to have adequate stocks of inventory on hand, the company attempts to have inventory on hand at the end of each month equal to 30% of the next month's projected cost of goods sold.

3) The controller has estimated that Helping Hand's other monthly expenses will be as follows:

Sales salaries $35,000

Advertising and promotion 5,000

Administrative salaries 12,000

Depreciation 7,500

Interest on bonds 2,000

Property taxes 1,000

In addition, sales commissions run at the rate of 2.0 percent of sales.Sales commissions arepaid in the month following the month of sale.

4) The company president has indicated that the company should invest $225,000 in an automated inventory-handling system to control the movement of inventory in the company's warehouse just after the new year begins.The president would like to purchase the equipment primarily from the company's cash and marketable securities.However, the president believes the company should have a minimum cash balance of $30,000 at the end of each month.If necessary, the remainder of the equipment purchase may be financed using short-term credit from a local bank.The minimum lending period for such a loan is three months (this means the earliest the loan can be paid off is March 31st.The current short-term interest rates are 6 percent per year and are expected to remain at this rate through the time the equipment is purchased.If a loan is necessary, the entire amount required for the quarter must be borrowed on January 1st and must be in a $1,000 increment.The loan is a short term loan and the president has decided it should be paid off at the end of the first quarter if possible.If the entire amount cannot be repaid at March 31st, any partial payment will be paid at the end of the first quarter and in a $1,000 increment.

5) Helping Hand's board of directors has indicated an intention to declare and pay dividends of $150,000 on the last day of each quarter.

6) The interest on any short-term borrowing will be paid when the loan is repaid.Interest on Helping Hand's bonds is paid semiannually on February 28 and August 31 for the preceding six month period.

7) Property taxes are paid quarterly on March 31, June 30, September 30, and December 31 for the preceding three-month period.

Required:Build a model to forecast Helping Hand Corp's cash balance at March 31, 2019.Your model must contain the following master budget schedules.Round all amounts to the nearest dollar.Your model should allow you to change any of the assumptions provided above and easily recalculate the ending cash balance at March 31, 2019.The assumptions may be on a separate worksheet but all of the schedules below must be on one worksheet.

10) memo to the president of Helping Hands Corp with at least two recommendations on how the company can ensure it completes the first quarter of 2019 with the minimum required cash balance.You should provide a plan to support your recommendation.For example, if you recommend an increase in sales, how can this be attained.Be specific.You should provide specific financial information for your recommendations utilizing your model (include a model for each of your recommendations).For example, if the company does X, the change in ending cash will be Y.Your model will become the property of Helping Hands Corp. and should be easy to use.Not buying the equipment is NOT an option.All assumptions are based on the purchase of the new equipment.

1) Sales budget:

2018 2019

November December January February March 1st Quarter

Total sales

Cash sales

Sales on account

2) Cash receipts budget:

2019

January February March 1st Quarter

Cash sales

Cash collections from credit sales made during current month

Cash collections from credit sales made during preceding month

Cash collections from credit sales made during 2nd preceding month

Total cash receipts

3) Purchases budget:

2018 2019

December January February March 1st Quarter

Budgeted cost of goods sold

Add:Desired ending inventory

Total goods needed

Less:Expected beginning inventory

Purchases

4) Cash disbursements budget:

2019

January February March 1st Quarter

Inventory purchases:

Cash payments for purchases during the current month

Cash payments for purchases during the preceding month

Total cash payments for inventory purchases

Other expenses:

Sales salaries

Advertising and promotion

Administrative salaries

Interest on bonds

Property taxes

Sales commissions

Total cash payments for other expenses

Total cash disbursements

5) Summary cash budget:

2019

January February March 1st Quarter

Cash receipts (sch 2)

Less:Cash disbursements (sch 4)

Change in cash balance during period dueto operations

Sale of marketable securities (1/2/19)

Proceeds from bank loan (1/2/19)

Purchase of equipment

Repayment of bank loan (3/31/19)

Interest on bank loan

Payment of dividends

Change in cash balance during the month

Beginning cash balance

Ending cash balance