Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr. Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures: Actual Forecast November December $280,000 January 300,008 February March Additional Information $360,000 April forecast $410,000 420,000 420,000 Of the firm's sales, 30 percent are for cash and the remaining 70 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 40 percent of sales and are purchased and received each month in an amount sufficient to cover the current month's expected sales. Materials are paid for in the month they are received. Labour expense is 30 percent of sales and is paid in the month of sales. Selling and administrative expense is 7 percent of sales and is also paid in the month of sales. Overhead is $30,000 in cash per month; amortization expense is $10,400 per month. Taxes of $8,400 will be paid in January and dividends of $4,000 will be paid in March. Cash at the beginning of January is $88,000 and the minimum desired cash balance is $83,000.
Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr. Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures: Actual Forecast November December $280,000 January 300,008 February March Additional Information $360,000 April forecast $410,000 420,000 420,000 Of the firm's sales, 30 percent are for cash and the remaining 70 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 40 percent of sales and are purchased and received each month in an amount sufficient to cover the current month's expected sales. Materials are paid for in the month they are received. Labour expense is 30 percent of sales and is paid in the month of sales. Selling and administrative expense is 7 percent of sales and is also paid in the month of sales. Overhead is $30,000 in cash per month; amortization expense is $10,400 per month. Taxes of $8,400 will be paid in January and dividends of $4,000 will be paid in March. Cash at the beginning of January is $88,000 and the minimum desired cash balance is $83,000.
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr.
Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through
March. Following are actual and forecasted sales figures:
Actual
November
December
Sales
Credit sales
Cash sales
$280,000 January
300,000 February
March
Of the firm's sales, 30 percent are for cash and the remaining 70 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 40 percent of sales and are purchased and
received each month in an amount sufficient to cover the current month's expected sales. Materials are paid for in the month they are
received. Labour expense is 30 percent of sales and is paid in the month of sales. Selling and administrative expense is 7 percent of
sales and is also paid in the month of sales. Overhead is $30,000 in cash per month; amortization expense is $10,400 per month.
Taxes of $8,400 will be paid in January and dividends of $4,000 will be paid in March. Cash at the beginning of January is $88,000
and the minimum desired cash balance is $83,000.
a. Prepare a schedule of monthly cash receipts for January, February and March.
Total cash receipts
Collections in the month after credit sales
Collections two months after credit sales
Forecast
Total cash payments
Payments purchases
Labour expense
Selling and administrative expense
Overhead
Taxes
Dividends
Total cash receipts
Total cash payments
$360,000 April forecast
480,000
420,000
b. Prepare a schedule of monthly cash payments for January, February and March.
Net cash flow
Beginning cash balance
Additional Information
$410,000
Cumulative cash balance
Monthly loan or (repayment)
Cumulative loan balance
Ending cash balance
Jin Daniels Health Products
Cash Payments Schedule
January
$
Jim Daniels Health Products
Cash Receipts Schedule
November
December
Jim Daniels Health Products
Cash Budget
January
February
$
$
February
$
c. Prepare a schedule of monthly cash budget with borrowings and repayments for January, February and March. (Do not leave any
empty spaces: Input a 0 wherever It is required. Negative answers and amounts to be deducted should be indicated by a minus
sign.)
$
March
$
March
January
February
$
$
$
March
$
April
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