Problem 15-10 Cash budgeting Helen Bowers, owner of Helen\'s Fashion Designs, is
ID: 2383974 • Letter: P
Question
Problem 15-10
Cash budgeting
Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2014 and 2015:
Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials:
General and administrative salaries are approximately $28,000 a month. Lease payments under long-term leases are $9,000 a month. Depreciation charges are $36,000 a month. Miscellaneous expenses are $2,800 a month. Income tax payments of $64,000 are due in September and December. A progress payment of $180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be $132,000, and a minimum cash balance of $90,000 should be maintained throughout the cash budget period.
Prepare a monthly cash budget for the last 6 months of 2014. If no entry required, leave the cell blank. Use minus sign to enter losses, loans outstanding or any other negative amounts.
Prepare monthly estimates of the required financing or excess funds - that is, the amount of money Bowers will need to borrow or will have available to invest. Round your answers to the nearest cent. Enter loans outstanding with minus sign.
Explanation / Answer
May June July August September October November December January Collections and purchases worksheet Sales (gross) 186000 186000 372000 540000 720000 360000 360000 90000 180000 Collections During month of sale 18600 18600 37200 54000 72000 36000 36000 9000 18000 During 1st month after sale 0 139500 139500 279000 405000 540000 270000 270000 67500 During 2nd month after sale 0 $ 27900 27900 55800 81000 108000 54000 54000 Total collections 18600 158100 204600 360900 532800 657000 414000 333000 139500 Purchases Labor and raw materials -90000 -90000 -126000 -882000 -306000 -234000 -163000 -90000 Payments for labor and raw materials -90000 -90000 -126000 -882000 -306000 -234000 -163000 -90000 Cash gain or loss for month Collections 204600 360900 532800 657000 414000 333000 139500 Payments for labor and raw materials -90000 -126000 -882000 -306000 -234000 -163000 -90000 General and administrative salaries -28000 -28000 -28000 -28000 -28000 -28000 -28000 -28000 -28000 Lease payments -9000 -9000 -9000 -9000 -9000 -9000 -9000 -9000 -9000 Miscellaneous expenses -2800 -2800 -2800 -2800 -2800 -2800 -2800 -2800 -2800 Income tax payments $ $ -64000 $ $ -64000 Design studio payment $ $ $ -180000 $ $ Total payments -39800 -39800 -129800 -165800 -985800 -525800 -273800 -266800 -129800 Net cash gain (loss) during month 74800 195100 -453000 131200 140200 66200 9700 Loan requirement or cash surplus Cash at start of month 132000 206800 401900 -51100 80100 220300 286500 Cumulative cash 206800 401900 -51100 80100 220300 286500 296200 Target cash balance 90000 90000 90000 90000 90000 90000 90000 Cumulative surplus cash or loans 116800 311900 -141100 -9900 130300 196500 206200 outstanding to maintain $90,000 target cash balance $ $ -231100 -99900 $ July 26800 August 221900 September -231100 October -99900 November 40300 December 106500