Cash Budgeting Dorothy Koehl recently leased space in the Southside Mall and ope
ID: 2805192 • Letter: C
Question
Cash Budgeting
Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl has frequently run out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of just how much she must borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.
Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,300 per month, and the rent is $2,200 per month. In addition, she must make a tax payment of $10,000 in December. The current cash on hand (on December 1) is $750, but Koehl has agreed to maintain an average bank balance of $5,500 - this is her target cash balance. (Disregard cash in the till, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)
The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $110,000.
Prepare a cash budget for December, January, and February.
Now, suppose Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this question are minimal.)
$ 131,250
Below are incorrect answers i have already tried
The net cash flow for february is not 18,574.83
The Cumulative NCF for Jan and feb are not -3,000.00 & 24,074.83
The Surplus cash or loans needed for Jan and Feb are not -8,500.00 & 18,574.83
Please help me find the actual correct answers. i keep getting postings with the incorrect answers i only need the answers for the ??. please note that all the numbers i have provided are already correct.
Sales Purchases December $120,000 $40,000 January 38,000 40,000 February 68,000 40,000Explanation / Answer
Dorothy Koehl Cash Budget December January Febuary Cash Beginning Balance $750 $5,500.00 $5,500.00 Cash Collections $120,000 $38,000 $68,000 Cash Avaliable $120,750 $43,500 $73,500 Cash Less Disbursements Payments for purchases $110,000 40000 40000 Salaries $4,300.00 $4,300.00 $4,300.00 Rent $2,200.00 $2,200.00 $2,200.00 Taxes $10,000.00 Total Disbursements $126,500.00 $46,500.00 $46,500.00 Excess of Cash ($5,750.00) ($3,000.00) $27,000.00 Borrowing 11250 8500 0 Payments 0 0 19750 Cash Balance $5,500.00 $5,500.00 $7,250.00 Or Cash Budget December January Febuary Sales $120,000 $38,000.00 $68,000.00 Purchases $40,000 $40,000 $40,000 Payment for Purchases $110,000 $40,000 $40,000 Salaries $4,300.00 $4,300.00 $4,300.00 Rent $2,200.00 $2,200.00 $2,200.00 Taxes $10,000.00 Total Payment $126,500.00 $46,500.00 $46,500.00 Cash at start of forecast $750.00 $5,500.00 $5,500.00 Cumulative Net Cash Flow ($5,750.00) ($3,000.00) $27,000.00 Target Cash Balance 5500 5500 $7,250.00 Surplus cash or loans needed $11,250.00 $8,500.00 ($19,750.00) When Koehl starts selling on a credit basis on Dec 1st giving 30 days to pay Cash Budget December January Febuary Cash Beginning Balance $750 $5,500.00 $79,000.00 Cash Collections $120,000 $38,000 Cash Avaliable $750 $125,500 $117,000 Cash Less Disbursements Payments for purchases $110,000 40000 40000 Salaries $4,300.00 $4,300.00 $4,300.00 Rent $2,200.00 $2,200.00 $2,200.00 Taxes $10,000.00 Total Disbursements $126,500.00 $46,500.00 $46,500.00 Excess of Cash ($125,750.00) $79,000.00 $70,500.00 Borrowing $ 131,250.00 0 0 Payments 0 0 $ (65,000.00) Cash Balance $5,500.00 $79,000.00 $5,500.00 Sales of December collected in Jan and Sales of Jan will be collected in Feb. In Jan no need to borrow because cash balance exceeds target cash balance of $5500 In Feb surplus cash after holding target cash balance of Feb can be used for repayment of borrowing. December January Febuary Sales $120,000 $38,000.00 $68,000.00 Purchases $40,000 $40,000 $40,000 Payment for Purchases $110,000 $40,000 $40,000 Salaries $4,300.00 $4,300.00 $4,300.00 Rent $2,200.00 $2,200.00 $2,200.00 Taxes $10,000.00 Total Payment $126,500.00 $46,500.00 $46,500.00 Cash at start of forecast $750.00 $5,500.00 $79,000.00 Cumulative Net Cash Flow ($125,750.00) $79,000.00 $70,500.00 Target Cash Balance $ 5,500.00 $5,500.00 Loan Repaid ($65,000.00) Surplus cash or loans needed $131,250.00