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 Additional Information $400,000 Forecast $260,000 January 340,000 February $400,000 April forecast 440,000 410,000 December March 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. 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. a. Prepare a schedule of monthly cash receipts for January, February, and March.
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 Additional Information $400,000 Forecast $260,000 January 340,000 February $400,000 April forecast 440,000 410,000 December March 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. 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. a. Prepare a schedule of monthly cash receipts for January, February, and March.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:5:44 PM M
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
December
Forecast
Additional Information
$260,000 January
340,000 February
March
$400,000 April forecast
440,000
410,000
$400,000
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.
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.
a. Prepare a schedule of monthly cash receipts for January, February, and March.
Harry's Carryout Stores
Cash Receipts Schedule
November
December
January
February
March
Sales
260,000 $
340,000 $
400,000
$
440,000
2$
410,000
Credit sales
104,000
136,000
160,000
176,000
164,000
Cash sales
240,000
264.000
246,000
One month after sale
27,200
32,000
35,200
Two months after sale
83,200
108,800
128,000
Total cash receipts
$
350,400 $
404,800
24
409,200
Transcribed Image Text:5:44 PM M B
Harry's Carryout Stores
Cash Payments Schedule
January
February
March
Payments for purchases
$
80,000 $
88,000
%24
82,000
Labor expense
200,000
220,000
205,000
Selling and administrative
60,000
66,000
61,500
Overhead
31,000
31,000
31,000
Taxes
8,600
Dividends
5,000
Total cash payments
$
379,600 $
405,000 $
384,500
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 $0)
Harry's Carryout Stores
Cash Budget
January
February
March
Total cash receipts
2$
350,400 $
404,800
$
409,200
Total cash payments
(379,600)
(405,000)
(384,500)
Net cash flow
(29,200)
(200)
24,700
Beginning cash balance
92,000
Cumulative cash balance
62,800
(200)
24,700
Monthly loan (or repayment)
Ending cash balance
62,800
(200)
24,700
Cumulative loan balance
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