The Sharpe Corporation\'s projected sales for the first eight months of 2014 are
ID: 2502058 • Letter: T
Question
The Sharpe Corporation's projected sales for the first eight months of 2014 are as follows:
Aug. $ 149,300
Of Sharpe's sales, 10% is for cash, another 60% is collected in the month following the sale, and 30% is collected in the second month. November and December sales for 2013 are $219,900 and $175,800, respectively. Sharpe purchases its new materials two months in advance of its sales equal to 60% of thier final sales price. The supplier is paid one month after it makes delivery. For example, purchases in April sales are made in Febuary and payment is made in March. In addition, Sharpie pays $11,000 per month for rent and $20,800 each month for other expendentures. Tax prepayments of $23,300 are made each quarter, beginning in March.
The company's cash balance at December 31, 2013, was $21,100; a minimum balance of $15,000 must be maintained at all times. Assume that any short term financing need to maintain the cash balance is paid off in the month of financing if sufficient funds are available. Interest on short-term loans (11%) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus, if in the month of April the firm expects to have a need for an additional $69,590, these funds would be borrowed at the beginning of April with interest of $638 (i.e., 0.11 x 1/12 x $69,590) owed for April being paid at the beginning of May.
A) Prepare a cash budget for Sharpe covering the first seven months of 2014..
This is what I have so far: The months of April, May, and June I have a "?" in the area in which I am having problems in.
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sales
$ 219,000
$ 175,800
$ 89,300
$ 120,000
$ 135,900
$ 204,700
$ 299,700
$ 269,200
$ 225,600
$ 149,300
Cash Receipts
Sales for cash (10%)
$ 8,930
$ 12,000
$ 13,590
$ 20,470
$ 29,970
$ 26,920
$ 22,560
First month of sales (60%)
$ 105,480
$ 53,580
$ 72,000
$ 81,540
$ 122,820
$ 179,820
$ 161,520
Second month of sales (30%)
$ 65,700
$ 52,740
$ 26,790
$ 36,000
$ 40,770
$ 61,410
$ 89,910
Total Cash Receipts
$ 180,110
$ 118,320
$ 112,380
$ 138,010
$ 193,560
$ 268,150
$ 273,990
Cash disbursements
Raw materials
$ 72,000
$ 81,540
$ 122,820
$ 179,820
$ 161,520
$ 135,360
$ 89,580
Rent
$ 11,000
$ 11,000
$ 11,000
$ 11,000
$ 11,000
$ 11,000
$ 11,000
Other expenditures
$ 20,800
$ 20,800
$ 20,800
$ 20,800
$ 20,800
$ 20,800
$ 20,800
Tax prepayments
$ -
$ -
$ 23,300
$ -
$ -
$ 23,300
$ -
Total Cash Disbursements
$ 103,800
$ 113,340
$ 177,920
$ 211,620
$ 193,320
$ 190,460
$ 121,380
Net Change in Cash
Net change in cash for period
$ 76,310
$ 4,980
$ (65,540)
$ (73,610)
$ 240
$ 77,690
$ 152,610
(+) Beginning cash balance
$ 21,100
$ 97,410
$ 102,390
$ 36,850
$ 15,000
$ 14,602
$ 92,292
(-) Interest on short-term borrowing
$ -
$ -
$ -
$ -
$ (638)
"?"
$ -
(-) Short-term borrowing repayments
$ -
$ -
$ -
$ -
"?"
"?"
$ -
(=) Ending cash balance b/borrowing
$ 97,410
$ 102,390
$ 36,850
$ (36,760)
$ 14,602
$ 92,292
$ 244,902
New Financing Needed
Financing needed for period
$ -
$ -
$ -
"?"
$ -
$ -
$ -
Ending Cash Balance
21,100
$ 97,410
$ 102,390
$ 36,850
$ 15,000
$ 14,602
$ 92,292
$ 244,902
Cumulative Borrowing
$ -
$ -
$ -
"?"
"?"
$ -
$ -
Jan. $ 89,300 May $ 299,700 Feb. $ 120,000 Jun. $ 269,200 Mar. $ 135,900 Jul. $ 225,600 Apr. $ 204,700Aug. $ 149,300
Explanation / Answer
Answer
Note 1
Note 2
Cash Budget for JAN TO JULY , 2014 Month Jan Feb March April May June July Opening Cash Balance 21,100 97,680 102,660 37,120 15,000 15,000 40,494 Cash Receipts: Cash Sales( note 1) 180,380 118,320 112,380 138,010 193,560 268,150 273,990 Borrowings (note 2) 51,490 232 Total Cash Available (A) 201,480 216,000 215,040 226,620 208,792 283,150 314,484 Cash Disbursements: Raw materail Purchase 72,000 81,540 122,820 179,820 161,520 135,360 89,580 Rent 11,000 11,000 11,000 11,000 11,000 11,000 11,000 Other Expenditure 20,800 20,800 20,800 20,800 20,800 20,800 20,800 Tax payment - - 23,300 - - 23,300 - Interest on Borrowing - - - - 472 474 - Payment of Short term borrowing - - - - - 51,722 - Total Payments (B) 103,800 113,340 177,920 211,620 193,792 242,656 121,380 Closing Balance (A-B) 97,680 102,660 37,120 15,000 15,000 40,494 193,104Related Questions
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