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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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 13P
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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
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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