You are a relatively recent hire to Hartz & Co., a local manufacturer of plumbing supply products. You have been asked to prepare a condensed statement of cash flows for the months of November and December of the current year for presentation to the company's management. Assume the cash balance at November 1 will be $75,000. It is the company's policy to maintain a minimum cash balance of $60,000 at the end of each month. Cash receipts (from cash sales and collection of accounts receivable) are projected to be $516,000 for November and $462,600 for December. Cash disbursements (sales commissions, advertising, delivery expense, etc.) prior to financing activity are scheduled to be $430,000 in November and $548,000 in December. Short-term borrowing, when needed, is done at the beginning of the month in increments of $1,000. The annual interest rate on any such loans is estimated to be 12%. Interest on any outstanding short-term loans is paid in cash at the end of the month. Repayments of principal (if any) are assumed to occur at the end of the month. As of November 1, the company has a $60,000 long-term loan from the local bank. This loan, including interest (at 12% per year) for the month of November, is payable at the end of November.
You are a relatively recent hire to Hartz & Co., a local manufacturer of plumbing supply products. You have been asked to prepare a condensed statement of cash flows for the months of November and December of the current year for presentation to the company's management. Assume the cash balance at November 1 will be $75,000. It is the company's policy to maintain a minimum cash balance of $60,000 at the end of each month. Cash receipts (from cash sales and collection of accounts receivable) are projected to be $516,000 for November and $462,600 for December. Cash disbursements (sales commissions, advertising, delivery expense, etc.) prior to financing activity are scheduled to be $430,000 in November and $548,000 in December. Short-term borrowing, when needed, is done at the beginning of the month in increments of $1,000. The annual interest rate on any such loans is estimated to be 12%. Interest on any outstanding short-term loans is paid in cash at the end of the month. Repayments of principal (if any) are assumed to occur at the end of the month. As of November 1, the company has a $60,000 long-term loan from the local bank. This loan, including interest (at 12% per year) for the month of November, is payable at the end of November.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cash budget
Cash balance, beginning
Add: Cash receipts
total cash available
Cash disbursement, prior to financing
Add min cash balance
total cash needs
Excess (deficiency) cash before financing
Financing:
Short-term borrowing, beginning of month
LT Principle Repayments, end of month
Cash interest, end of month
Total effects of financing
Ending cash balance (Add min bal., excess, financing)
November December
Transcribed Image Text:10-28 Cash Budget-financing effects
You are a relatively recent hire to Hartz & Co., a local manufacturer of plumbing supply products.
You have been asked to prepare a condensed statement of cash flows for the months of
November and December of the current year for presentation to the company's management.
Assume the cash balance at November 1 will be $75,000. It is the company's policy to maintain
a minimum cash balance of $60,000 at the end of each month. Cash receipts (from cash sales
and collection of accounts receivable) are projected to be $516,000 for November and $462,600
for December. Cash disbursements (sales commissions, advertising, delivery expense, etc.)
prior to financing activity are scheduled to be $430,000 in November and $548,000 in December.
Short-term borrowing, when needed, is done at the beginning of the month in increments
of $1,000. The annual interest rate on any such loans is estimated to be 12%. Interest on any
outstanding short-term loans is paid in cash at the end of the month. Repayments of principal
(if any) are assumed to occur at the end of the month. As of November 1, the company has
a $60,000 long-term loan from the local bank. This loan, including interest (at 12% per year)
for the month of November, is payable at the end of November.
Data:
Nov 1 cash balance
Min. cash balance
Cash collection November
Cash collection December
Cash disbursements November
Cash disbursements December
$75,000
60,000
516,000
462,600
430,000
548,000
Loans increments
1,000
Annual interest rates on loans
12%
Long-term principle paid November
60,000
Borrow at beginning, repay and interest at end of month
Req 1: Prepare a cash budget for November and December
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