You have recently been hired by Piepkorn Manufacturing to work in the newly established treasury department. Piepkorn Manufacturing is a small company that produces cardboard boxes in a variety of sizes for different purchasers. Gary Piepkorn, the owner of the company, works primarily in the sales and production areas of the company. Currently, the company puts all receivables in one shoe box and all payables in another. Because of the disorganized system, thefinance area needs work, and thats what youve been brought in to do.

The company currently has a cash balance of $140,000 (beginning cash balance in Q1), and it plans to purchase new box-folding machinery in the fourth quarter at a cost of $445,000 (This will be a capital expenditure). The machinery will be purchased with cash because of a discount offered.

The companys policy is to maintain a minimum cash balance of $125,000. All sales and purchases are made on credit. Gary Piepkorn has projected the following gross sales for each of the next four quarters:

Also, gross sales for Q5 (the first quarter of next year) are projected at $1,290,000. Piepkorn currently has an accounts receivable period of 30 days (it collects 2/3 this quarter and the remaining 1/3 next quarter) and an accounts receivable balance of $5000,000. Twenty percent of the accounts receivable balance in Q1 is from a company that has just entered bankruptcy, and it is likely this portion of the accounts receivable will never be collected.

Piepkorn typically orders 50 percent of next quarters projected gross sales in the current quarter, and suppliers are typically paid in 30 days (2/3 paid this quarter and the remaining 1/3 next quarter). Beginning payables are $325,000. Wages, taxes, and other costs run about 30 percent of gross sales. The company has a quarterly interest payment of $113,000 on its long-term debt and does not pay a dividend.

The company uses a local bank for its short-term financial needs. It pays 1.5 percent per quarter on all short-term borrowing.

Gary has asked you to prepare a cash budget and short-term financial plan for the company under the current policies

Using the information provided, complete the following:

Calculate the Cash Collections for Piepkorn.

Calculate the Cash Disbursements for Piepkorn.

Calculates the Net Cash Flows and Cash Balance for Piepkorn.

Fill in the Short-term Financial Plan for Piepkorn.