Question

(Cash budget​) The Sharpe​ Corporation's projected sales for the first 8 months of 2016 are shown in the following​ table:

January	​$170,000	May	​ $280,000
February	$100,000	June	$250,000
March	$115,000	July	$205,000
April	$220,000	August	$130,000

Of​ Sharpe's sales, 30 percent is for​ cash, another 40 percent is collected in the month following the​ sales, and 30 percent is collected in the second month following sales. November and December sales for 2015 were $200,000 and $155,000​, respectively. Sharpe purchases its raw materials 2 months in advance of its sales. The purchases are equal to 60 percent of the final sales price of​ Sharpe's products. The supplier is paid 1 month after it makes a delivery. For​ example, purchases for April sales are made in​ February, and payment is made in March. In​ addition, Sharpe pays $8,000 per month for rent and $17,000 each month for other expenditures. Tax prepayments of $22,000 are made each​ quarter, beginning in March. The​ company's cash balance on December​ 31, 2015, was $22,000. This is the minimum balance the firm wants to maintain. Any borrowing that is needed to maintain this minimum is paid off in the subsequent month if there is sufficient cash. Interest on​ short-term loans​ (12 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month.​ Thus, if in the month of April the firm expects to have a need for an additional​ $60,500, these funds would be borrowed at the beginning of April with interest of​ $605​(0.12 ×​ 1/12 × ​$60,500) owed for April and paid at the beginning of May.

a. Prepare a cash budget for Sharpe covering the first 7 months of 2016.

b. Sharpe has​ $200,000 in notes payable due in July that must be repaid or renegotiated for an extension. Will the firm have ample cash to repay the​ notes?

Fill in the Collections for the month of​ January:  ​(Round to the nearest​ dollar.)

	Nov	Dec	Jan	Feb	Mar	Apr	May	June	July
Sales	​$200,000	​$155,000	​$170,000	​$100,000	​$115,000	​$220,000	​$280,000	​$250,000	​$205,000
​Collections:
Month of sale ​(30​%)
First month ​(40​%)
Second month ​(30​%)
Total Collections			​

Answer 1

(2) Cash budget upto July 2016: WN 1 cash collections: NOV Dec Jan Feb Mar Api May June July Sales ($) 2,00.00 1,55860 1,70.000 100.000 1,15,000 22.08000 2,80000 2,53000 305poc Collections: Month of sale (30%) 60,000 46,500 51,000 30,000 34,500 66,000 84,000 75000 61,500 first month (40%) - 80,000 62.000 68,000 40,000 46,000 88,000 1,12000 1,00pot second month (30%) - - 60,000 46,500 51,000 30,000 34,500 66,000 84,000 Total collections 60000 126500 173000 144500 125500 142000 206500 253000 245500 UN 2: Purchase of rawmaterials: Nou bec NOV DEC Jan Feb Mar Apr May June Tante Mar July Purchase($) 102.000 60000 69 poo 13200 168000 150000 123000 78000 (176000 X601) 01,00,000 5,000 1.20000 (2,80,000 2,50 po (205000 (139000 50%) x60%) x60%) x60%) x60%) X60%) X60%) payment on to a n en - 102000 60,00 69 800 137000 168000 150000 123000 78.000

cash budget: Jan Feb Mar April May June July Collections (WNI) 60,000 126500 173000 144500 125500 - Collections (WNI) 173000 144500 125500 142000 206500 253000 245500 opening cash balance 22.000 1,10,000 160500 107000 56000 87500 170500 A 1,95000 254500 286000 249000 262500 340500 416000 Lessi payments from purchases 60,000 69000 132000 168000 150000 123000 78,000 Rent 8000 8000 8000 8000 8000 8000 8000 other exp 17,000 17,000 17000 17000 17000 17000 17000 Tax prepayments 22,000 22,000 - 30ԵՄամոզ - Interest - Repayment B 85,000 closing bal(AB) 1, lopoo 94,000 160500 1,79,000 107000 193000 175000 170000 103000 56,000 87500 170500 313000 (b) Sharpe firm have ample cash to repay the notes $2,00,000 due in July.