Question

Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop. Business has been good, but Koehl frequently runs out of cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers. Koehl plans to borrow from the bank to have cash ready as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high.

Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays herself a salary of $4,700 per month, and the rent is $2,000 per month. In addition, she must make a tax payment of $11,000 in December. The current cash on hand (on December 1) is $400, but Koehl has agreed to maintain an average bank balance of $4,500 - this is her target cash balance. (Disregard the amount in the cash register, which is insignificant because Koehl keeps only a small amount on hand in order to lessen the chances of robbery.)

The estimated sales and purchases for December, January, and February are shown below. Purchases during November amounted to $140,000.

	Sales		Purchases
December	$120,000		$45,000
January	42,000		45,000
February	56,000		45,000

1. Prepare a cash budget for December, January, and February. Do not round intermediate calculations. Round your answers to the nearest dollar. Negative values, if any, should be indicated by a minus sign.

   Collections and Purchases:
   	December		January		February
   Sales (Collections)	$		$		$
   Purchases	$		$		$
   Payments for purchases	$		$		$
   Salaries	$		$		$
   Rent	$		$		$
   Taxes	$		---		---
   Total payments	$		$		$
   Cash at start of forecast	$		---		---
   Net cash flow	$		$		$
   Cumulative cash balance	$		$		$
   Target cash balance	$		$		$
   Surplus cash or loans needed	$		$		$

2. Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customers accept these terms, and all other facts in the problem are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The calculations required to answer this part are minimal.) Do not round intermediate calculations. Round your answer to the nearest dollar.

   $  

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

? v L 1 06-50 ENG 24-02-2070 25 X fix F0609 - 2 FK FLFMFN FOFP F Q - 608 a CASH BUDGET 609 610 611 612 613 614 615 616 617 618 619 COLLECTIONS AND PURCHASES DECEMBER JANUARY FEBRUARY 120000 42000 56000 45000 45000 45000 140000 45000 45000 4700 4700 4700 2000 2000 2000 11000 157700 51700 51700 400 4500 4500 -37700 -9700 4300 -37300 -47000 -42700 4500 4500 4500 -41800 -51500 -47200 A SALES PURCHASES 1 PAYMENT FOR PURCHASES 2 SALARIES 3 RENT 4 TAXES B =1+2+3+4 TOTAL PAYMENTS C CASH AT THE START OF FORECAST A-B NET CASH FLOW CUMULATIVE NCF TARGET CASH BALANCE SURPLUS CASH OR LOANS NEEDED 620 621 622 625 630 631 A SALES PURCHASES 1 PAYMENT FOR PURCHASES CASH BUDGET budget 45 days cycle DECEMBER O [NO SALES REALIZED IN DECEMBER) 45000 140000 ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float FIFO B-S profit loss SALES BUDGET du ... :

? v L 1 ENG 06:51 24-02-2020 25 F0650 X fix - FK FL FM FN FC FP FQ . 627 628 629 630 631 632 633 634 DECEMBER O [NO SALES REALIZED IN DECEMBER] 45000 140000 4700 2000 11000 157700 400 -157700 - 157300 4500 -161800 A SALES PURCHASES 1 PAYMENT FOR PURCHASES 2 SALARIES 3 RENT 4 TAXES B =1+2+3+4 TOTAL PAYMENTS C CASH AT THE START OF FORECAST A-B NET CASH FLOW CUMULATIVE NCF TARGET CASH BALANCE SURPLUS CASH OR LOANS NEEDED 635 636 637 638 639 640 LOAN REQUIREMENT = 161800 642 ANSWER 643 644 645 647 648 649 650 ► FIFO CASH BUDGET budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET du ... :