Question

Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr. Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures: November December Forecast Additional Information $350,000 January $450,000 April forecast $510.ece 0.000 February 500.000 March 520,000 Of the firm's sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 20 percent are paid in the month after sale and 80 percent are paid in the second month after the sale. Materials cost 40 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. Labour expense is 35 percent of sales and is paid in the month of sales. Selling and administrative expense is 6 percent of sales and is also paid in the month of sales. Overhead is $32,500 in cash per month, Andortization expense is $10.900 per month. Taxes of $8.900 will be paid in January and dividends of $6,500 will be paid in March. Cash at the beginning of January is $98,000, and the minimum desired cash balance is $93.000. .. Prepare a schedule of monthly cash receipts for January, February and March i Daniels Health Products Cash Receipts Schedule December January Sales Credit sales collections in the month after credit sales Collections to this after credit sales Total cash rects

Answer 1

Jim Daniels Health Products
Cash Receipts Schedule								Calculation
Req A	Nov	Dec	Jan	Feb	Mar	Apr		Nov	Dec	Jan	Feb	Mar	Apr
Sales	380,000	400,000	460,000	500,000	520,000	510,000
Credit sales	114,000	120,000	138,000	150,000	156,000	153,000		=380,000*30%	=400,000*30%	=460,000*30%	=500,000*30%	=520,000*30%	=510,000*30%
Cash sales	266,000	280,000	322,000	350,000	364,000	357,000		=380,000*70%	=400,000*70%	=460,000*70%	=500,000*70%	=520,000*70%	=510,000*70%
Collections in month after credit sales		22,800	24,000	27,600	30,000	31,200			=114,000*20%	=120,000*20%	=138,000*20%	=150,000*20%	=156,000*20%
Collections 2 months after credit sales			91,200	96,000	110,400	120,000				=114,000*80%	=120,000*80%	=138,000*80%	=150,000*80%
Total Cash Receipts			437,200	473,600	504,400
Cash Payments Schedule
Req B			Jan	Feb	Mar					Jan	Feb	Mar
Payment for Purchases			184,000	200,000	208,000					=460,000*40%	=500,000*40%	=520,000*40%
Labour expense			161,000	175,000	182,000					=460,000*35%	=500,000*35%	=520,000*35%
Selling and administrative expense			27,600	30,000	31,200					=460,000*6%	=500,000*6%	=520,000*6%
Overhead			32,500	32,500	32,500
Taxes			8,900
Dividends					6,500
Total Cash Payments			414,000	437,500	460,200
Cash budget
Req C			Jan	Feb	Mar					Jan	Feb	Mar
Total Cash Receipts			437,200	473,600	504,400
Total Cash Payments			414,000	437,500	460,200
Net cash flow			23,200	36,100	44,200
Beginning Cash Balance			98,000	121,200	157,300
Cumulative Cash Balance			121,200	157,300	201,500
Monthly loan or (repayment)			-	-	-
Cumulative Loan Balance			-	-	-
Ending Cash Balance			121,200	157,300	201,500