Preparation of a CashBudget Juan’s Taco Company has restaurants in five colleget
ID: 2457727 • Letter: P
Question
Preparation of a CashBudget
Juan’s Taco Company has restaurants in five collegetowns. Juan wants to expand into Austin and College Stationand needs a bank loan to do this. Mr. Bryan, the banker, willfinance construction if Juan can present an acceptable three-monthfinancial plan for January through March. The following are actualand forecasted sales figures:
Actual
Forecast
AdditionalInformation
November $120,000
January $190,000
Aprilforecast $230,000
December 140,000
February 210,000
March 230,000
Of Juan’s sales, 30 percent are for cash and the remaining70 percent are on credit. Of credit sales, 40 percent are paid inthe month after sale and 60 percent are paid in the second monthafter the sale. Materials cost 20 percent of sales and are paid forin cash. Labor expense is 50 percent of sales and it’spaid in the month of sales. Selling and administrative expense is 5percent of sales and is also paid in the month of sale. Overheadexpense is $12,000 in cash per month; depreciation expense is$25,000 per month. Taxes of $20,000 and dividends of $16,000 willbe paid in March. Cash at the beginning of January is $70,000 andthe minimum desired cash balance is $65,000.
For January, February, and March, prepare a schedule of monthlycash receipts, monthly cash payments, and a complete monthly cashbudget with borrowings and repayments.
Actual
Forecast
AdditionalInformation
November $120,000
January $190,000
Aprilforecast $230,000
December 140,000
February 210,000
March 230,000
Explanation / Answer
Cash Budget for January,February, March
Details
January
February
March
Cash Budget for January,February, March
Details
January
February
March
Cash at the beginning 70,000.00 65,000.00 65,000.00 Cash Sales 57,000.00 63,000.00 69,000.00 Add: expected Receipts Cash introduced to maintain minimum Balance 14,400.00 5,000.00 Credit Sales receipts of November 29,400.00 Credit Sales Receipts of December 39,200.00 58,800.00 Credit Sales Receipts of January 53,200.00 79,800.00 Credit Sales Receipts of February 58,800.00 Anticipated Payments Material Cost (38,000.00) (63,000.00) (46,000.00) Labor Expenses (95,000.00) (105,000.00) (115,000.00) Overhead Expenses (12,000.00) (12,000.00) (12,000.00) Cash Balance at theEnd 65,000.00 65,000.00 99,600.00