Question

MB 235 Spring 2019 Take-home portion of final Problem 1 (20 points) It is currently November 1, 2019 and Design Supply Corporation, a merchandising entity, is preparing a cash budget for the first two months of 2020. The following data have been forecasted Sales 750,000 $00,000 Opcrating expenses 146,800167,400 52,700 62.00 8,750 23,750 23.750 Advertising Depreciation Cash 8,750 End of January balances: 120,000 480,000 Bank loan Additional data: (1) Sales are 40% cash and 60% credit each month. It is estimated that 4% of the credit sales will never be collected and will be treated as Bad Debt Expense. The collection pattern for credit sales is 10% in the month of the sale, 70% one month after the sale and 20% two months later. Total sales in December, 2019 are expected to be $1,000,000 and March 2020 sales are expected to be $600,000. (2) Cost of Goods Sold (COGS) is estimated at 60% of Sales and management expects ending inventory to equal 10% of next period's cost of goods sold. (3) Purchases are all on credit, with 40% paid in the month of purchase and the balance in the following month. (4) Operating expenses are paid in the month incurred. (5) The firm desires a minimum cash balance of $100,000 at the end of each month. (6) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month ( 12% annually) is paid on the outstanding loan balance as of the beginning of the month. Interest must be paid each month there is an outstanding balance and repayment of any part of the principal is made whenever the company's cash balance exceeds $100,000. Prepare the cash budget for February, 2020. All supporting calculations must be clearly labeled and cross referenced Required

Answer 1

Cash Budget
	February
Opening Balance of cash	$   120,000.00
Cash Receipts
Cash Collections	$   459,000.00
Cash Sale	$   320,000.00
Total Cash Receipts	$   779,000.00
Cash Balance Available	$   899,000.00
Cash Payments
Cash paid for Purchase	$   459,000.00
Payroll	$   167,400.00
Advertising	$      62,800.00
Rent	$        8,750.00
Interest on loan	$        4,800.00
Total Cash Payments	$   702,750.00
Preliminary Cash Balance at end	$   196,250.00
Repayment of Loan	$   (96,250.00)
Closing Balance of Cash	$   100,000.00

Cash Collections
	December	January	February
Sales	1000000	750000	800000
Cash Sale	$   400,000.00	$      300,000.00	$    320,000.00
Credit Sale	$   600,000.00	$      450,000.00	$    480,000.00
Cash Collections
December	$      60,000.00	$      420,000.00	$      96,000.00
January		$        45,000.00	$    315,000.00
February			$      48,000.00
Total Cash Collections	$      60,000.00	$      465,000.00	$    459,000.00

Cash Payments
	January	February	March
Sales	$   750,000.00	$      800,000.00	600000
COGS	$   450,000.00	$      480,000.00	360000
Ending Inventory	$      48,000.00	$        36,000.00
Beginning Inventory	$      45,000.00	$        48,000.00
Purchase Amount	$   453,000.00	$      468,000.00
Cash Payments to Vendor
January	$   181,200.00	$      271,800.00
February		$      187,200.00
Total	$   181,200.00	$      459,000.00	$                      -