Question

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 Forecast Additional Information November $240,000 January $320,000 April forecast $360,000 December 260,000 February 360,000 March 370,000 Of the firm's sales, 60 percent are for cash and the remaining 40 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 30 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 40 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 $22,000 in cash per month. Depreciation expense is $10,200 per month. Taxes of $8,200 will be paid in January, and dividends of $3,000 will be paid in March. Cash at the beginning of January is $84,000, and the minimum desired cash balance is $79.000. a. Prepare a schedule of monthly cash receipts for January, February, and March. Harry's Carryout Stores Cash Receipts Schedule December January November February March Sales Credit sales Cash sales One month after sale Two months after sale Total cash receipts $ 0 $ 0 $

Answer 1

Requirement a
Harry's Carryout Stores
Cash Receipts Schedule
	November	December	January	February	March
Sales	240000	260000	320000	360000	370000
Credit sales	96000	104000	128000	144000	148000
Cash sales			192000	216000	222000
One month after sale			31200	38400	43200
Two months after sale			67200	72800	89600
Total Cash receipts			290400	327200	354800

Requirement b
Harry's Carryout Stores
Cash Payments schedule
	January	February	March
Payments for purchases	96000	108000	111000
labor expense	128000	144000	148000
Selling and adminstrative	48000	54000	55500
Overhead	22000	22000	22000
Taxes	8200
Dividends			3000
Total cash payments	302200	328000	339500
Requirement c
Harry's Carryout Stores
Cash Budget
	January	February	March
Total cash receipts	290400	327200	354800
Total cash payments	302200	328000	339500
Net cash flow	-11800	-800	15300
Beginning cash balance	84000	79000	79000
Cumulative cash balance	72200	78200	94300
Monthly loan (or repayment)	6800	800	-7600
Ending cash balance	79000	79000	86700
Cumulative loan balance	6800	7600	0