Chapter 15 Problem 2 James Buchanan Orthotics and Prosthetics is planning to req
ID: 2337464 • Letter: C
Question
Chapter 15 Problem 2 James Buchanan Orthotics and Prosthetics is planning to request a line of credit from its bank. The company has produced sales estimates, and these appear in the worksheet below. Collection estimates are as follows: 10 percent within the month of sale, 75 percent in the month following the sale, and 15 percent in the second month following the sale. Labor and supplies estimates also appear in the worksheet below. Payments for labor and supplies are typically made during the month following the one in which these costs have been incurred. General and administrative salaries will amount to approximately $27,000 a month; lease payments under long-term lease contracts will be $9,000 a month; depreciation charges will be $36,000 a month; miscellaneous expenses will be $2,700 a month; income tax payments of $63,000 will be due in both September and December; and a progress payment of $180,000 on a new building must be paid in October. Cash on hand on July 1 will amount to $132,000, and a minimum cash balance of $90,000 will be maintained throughout the cash budget period. What loan will be the company require in October? May June July August September October November December January Collections worksheet: Billed charges $180,000 $180,000 $360,000 $540,000 $720,000 $360,000 $360,000 $90,000 $180,000 Collections Within 30 days 30-60 days 60-90 days Total collections Supplies worksheet: Amount of labor and supplies $90,000 $90,000 $126,000 $882,000 $306,000 $234,000 $162,000 $90,000 Payments made for labor and supplies Net cash gain (loss): Total collections Total purchases General and administrative salaries Lease payments Miscellaneous expenses Taxes Progress payment Total payments Net cash gain/loss Borrowing/surplus summary: Cash at beginning with no borrowing Cash at end with no borrowing Target cash balance (given) Cumulative surplus cash / loan balance
Chapter 15 Problem 2
James Buchanan Orthotics and Prosthetics is planning to request a line of credit from its bank. The company has produced sales estimates, and these appear in the worksheet below. Collection estimates are as follows: 10 percent within the month of sale, 75 percent in the month following the sale, and 15 percent in the second month following the sale. Labor and supplies estimates also appear in the worksheet below. Payments for labor and supplies are typically made during the month following the one in which these costs have been incurred. General and administrative salaries will amount to approximately $27,000 a month; lease payments under long-term lease contracts will be $9,000 a month; depreciation charges will be $36,000 a month; miscellaneous expenses will be $2,700 a month; income tax payments of $63,000 will be due in both September and December; and a progress payment of $180,000 on a new building must be paid in October. Cash on hand on July 1 will amount to $132,000, and a minimum cash balance of $90,000 will be maintained throughout the cash budget period. What loan will be the company require in October?
May
June
July
August
September
October
November
December
January
Collections worksheet:
Billed charges
$180,000
$180,000
$360,000
$540,000
$720,000
$360,000
$360,000
$90,000
$180,000
Collections
Within 30 days
30-60 days
60-90 days
Total collections
Supplies worksheet:
Amount of labor and supplies
$90,000
$90,000
$126,000
$882,000
$306,000
$234,000
$162,000
$90,000
Payments made for labor and supplies
Net cash gain (loss):
Total collections
Total purchases
General and administrative salaries
Lease payments
Miscellaneous expenses
Taxes
Progress payment
Total payments
Net cash gain/loss
Borrowing/surplus summary:
Cash at beginning with no borrowing
Cash at end with no borrowing
Target cash balance (given)
Cumulative surplus cash / loan balance
May
June
July
August
September
October
November
December
January
Collections worksheet:
Billed charges
$180,000
$180,000
$360,000
$540,000
$720,000
$360,000
$360,000
$90,000
$180,000
Collections
Within 30 days
30-60 days
60-90 days
Total collections
Explanation / Answer
May June July August September October November December January Collections worksheet: Billed charges $180,000 $180,000 $360,000 $540,000 $720,000 $360,000 $360,000 $90,000 $180,000 Collections Within 30 days $18,000 $18,000 $36,000 $54,000 $72,000 $36,000 $36,000 $9,000 $18,000 30-60 days $135,000 $135,000 $270,000 $405,000 $540,000 $270,000 $270,000 $67,500 60-90 days $27,000 $27,000 $54,000 $81,000 $108,000 $54,000 $54,000 Total collections $18,000 $153,000 $198,000 $351,000 $531,000 $657,000 $414,000 $333,000 $139,500 Supplies worksheet: Amount of labor and supplies $90,000 $90,000 $126,000 $882,000 $306,000 $234,000 $162,000 $90,000 Payments made for labor and supplies $90,000 $90,000 $126,000 $882,000 $306,000 $234,000 $162,000 $90,000 Net cash gain (loss): Total collections 18000 153000 198000 351000 531000 657000 414000 333000 139500 Total purchases 90000 90000 126000 882000 306000 234000 162000 90000 General and administrative salaries $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 Lease payments $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 Miscellaneous expenses $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $2,700 Taxes $63,000 $63,000 Progress payment $180,000 Total payments 38700 128700 128700 164700 983700 344700 452700 263700 128700 Net cash gain/loss -20700 24300 69300 186300 -452700 312300 -38700 69300 10800 Borrowing/surplus summary: Cash at beginning with no borrowing $132,000 $111,300 $135,600 $204,900 $391,200 $151,500 $463,800 $425,100 $494,400 Cash at end with no borrowing $111,300 $135,600 $204,900 $391,200 ($61,500) $463,800 $425,100 $494,400 $505,200 Target cash balance (given) $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 Cumulative surplus cash / (loan balance) $21,300 $45,600 $114,900 $301,200 ($151,500) $373,800 $335,100 $404,400 $415,200 Loan Balance for October - $ 151500
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