10. Harry's Carryout Stores has eight locations. The firm wishes toexpand by two more stores and needs a bank loan to do this. Mr. Wilson,the banker, will finance construction if the firm can present anacceptable three-month financial plan for January through March. Thefollowing are actual and forecast sales figures:ActualNovember $320, 000 January $400,000December 340,000 February 440,000March 410,000ForecastSalesCredit salesOf the firm's sales, 60 percent are for cash and the remaining 40 percent areon credit. Of credit sales, 20 percent are paid in the month after sale and 80percent are paid in the second month after the sale. Materials cost 20 percentof sales and are purchased and received each month in an amount sufficientto cover the following month's expected sales. Materials are paid for in themonth after they are received. Labor expense is 50 percent of sales and ispaid for in the month of sales. Selling and administrative expense is 15percent of sales and is paid in the month of sales. Overhead expense is$31,000 in cash per month.Cash salesOne month after saleTwo months after saleDepreciation expense is $10,600 per month. Taxes of $8,600 will be paid inJanuary, and dividends of $5,000 will be paid in March. Cash at the beginningof January is $92,000, and the minimum desired cash balance is $87,000.Total cash receiptsa. Prepare a schedule of monthly cash receipts for January, February, andMarch.Payments for purchasesLabor expenseSelling and administrativeOverheadTaxesDividendsTotal cash paymentsAprilforecastNovemberAdditionalInformationHarry's Carryout StoresCash Receipts ScheduleDecemberHarry's Carryout StoresCash Payments ScheduleJanuary$400,000JanuaryFebruaryb. Prepare a schedule of monthly cash payments for January, February, andMarch.FebruaryMarchMarchc. Prepare a monthly cash budget with borrowings and repayments forJanuary, February, and March. (Negative amounts should be indicated by aminus sign. Assume the January beginning loan balance is $0.)

Cash budgets are important in accounting. They show different sources of cash inflows and outflows…

a. Prepare a schedule of monthly cash receipts for January, February, and March. Sales Credit sales Cash sales One month after sale Two months after sale Total cash receipts November Payments for purchases Labor expense Selling and administrative Overhead Taxes Dividends Total cash payments Harry's Carryout Stores Cash Receipts Schedule December January Harry's Carryout Stores Cash Payments Schedule January b. Prepare a schedule of monthly cash payments for January, February, and March. February February March March c. Prepare a monthly cash budget with borrowings and repayments for January, February, and March. (Negative amounts should be indicated by a minus sign. Assume the January beginning loan balance is $0.)

a. Prepare a schedule of monthly cash receipts for January, February, and March. Sales Credit sales Cash sales One month after sale Two months after sale Total cash receipts November Payments for purchases Labor expense Selling and administrative Overhead Taxes Dividends Total cash payments Harry's Carryout Stores Cash Receipts Schedule December January Harry's Carryout Stores Cash Payments Schedule January b. Prepare a schedule of monthly cash payments for January, February, and March. February February March March c. Prepare a monthly cash budget with borrowings and repayments for January, February, and March. (Negative amounts should be indicated by a minus sign. Assume the January beginning loan balance is $0.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

10. Harry's Carryout Stores has eight locations. The firm wishes to
expand by two more stores and needs a bank loan to do this. Mr. Wilson,
the banker, will finance construction if the firm can present an
acceptable three-month financial plan for January through March. The
following are actual and forecast sales figures:
Actual
November $320, 000 January $400,000
December 340,000 February 440,000
March 410,000
Forecast
Sales
Credit sales
Of the firm's sales, 60 percent are for cash and the remaining 40 percent are
on credit. Of credit sales, 20 percent are paid in the month after sale and 80
percent are paid in the second month after the sale. Materials cost 20 percent
of sales and are purchased and received each month in an amount sufficient
to cover the following month's expected sales. Materials are paid for in the
month after they are received. Labor expense is 50 percent of sales and is
paid for in the month of sales. Selling and administrative expense is 15
percent of sales and is paid in the month of sales. Overhead expense is
$31,000 in cash per month.
Cash sales
One month after sale
Two months after sale
Depreciation expense is $10,600 per month. Taxes of $8,600 will be paid in
January, and dividends of $5,000 will be paid in March. Cash at the beginning
of January is $92,000, and the minimum desired cash balance is $87,000.
Total cash receipts
a. Prepare a schedule of monthly cash receipts for January, February, and
March.
Payments for purchases
Labor expense
Selling and administrative
Overhead
Taxes
Dividends
Total cash payments
April
forecast
November
Additional
Information
Harry's Carryout Stores
Cash Receipts Schedule
December
Harry's Carryout Stores
Cash Payments Schedule
January
$400,000
January
February
b. Prepare a schedule of monthly cash payments for January, February, and
March.
February
March
March
c. Prepare a monthly cash budget with borrowings and repayments for
January, February, and March. (Negative amounts should be indicated by a
minus sign. Assume the January beginning loan balance is $0.)

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