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CASH BUDGETING Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of...

Question

CASH BUDGETING Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of...

CASH BUDGETING

Helen Bowers, owner of Helen's Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2016 and 2017:

May 2016 $186,000
June 186,000
July 372,000
August 540,000
September 720,000
October 360,000
November 360,000
December 90,000
January 2017 180,000

Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials:

May 2016 $90,000
June 90,000
July 126,000
August 882,000
September 307,000
October 234,000
November 163,000
December 90,000

General and administrative salaries are approximately $28,000 a month. Lease payments under long-term leases are $9,000 a month. Depreciation charges are $36,000 a month. Miscellaneous expenses are $2,800 a month. Income tax payments of $62,000 are due in September and December. A progress payment of $180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be $132,000, and a minimum cash balance of $90,000 should be maintained throughout the cash budget period.

a. Prepare a monthly cash budget for the last 6 months of 2016. If no entry required, enter 0. Use minus sign to enter lossLoan requirement or cash surplus Cash at start of month $ $ Cumulative cash $ Target cash balance Cumulative surplus cash orPrepare monthly estimates of the required financing or excess funds - that is, the amount of money Bowers will need to borrow or will have available to invest. Round your answers to the nearest dollar. Enter loans outstanding with minus sign.

July $
August $
September $
October $
November $
December $
a. Prepare a monthly cash budget for the last 6 months of 2016. If no entry required, enter "0". Use minus sign to enter losses, loans outstanding or any other negative amounts. May June July August September October November December January Collections and purchases worksheet Sales (gross) Collections During month of sale During 1st month after sale During 2nd month after sale Total collections Purchases Labor and raw materials Payments for labor and raw materials A A Cash gain or loss for month Collections Payments for labor and raw materials General and administrative salaries Lease payments Miscellaneous expenses Income tax payments Design studio payment Total payments Net cash gain (loss) during month
Loan requirement or cash surplus Cash at start of month $ $ Cumulative cash $ Target cash balance Cumulative surplus cash or loans outstanding to maintain $90,000 target cash balance $ $ $ $ $

Answers

Helen's Fashion Designs Calculation
Cash budget May June July Aug Sep Oct Nov Dec Jan
Collections & purchases worksheet
Sales (gross)     186,000    186,000    372,000    540,000     720,000    360,000    360,000      90,000    180,000
Collections
During month of sale        18,600      18,600      37,200      54,000        72,000      36,000      36,000        9,000
During 1st month after sale                 -      139,500    139,500    279,000     405,000    540,000    270,000    270,000
During 2nd month after sale                 -                 -        27,900      27,900        55,800      81,000    108,000      54,000
Total collections    204,600    360,900     532,800    657,000    414,000    333,000
Purchases
Labor and raw materials        90,000      90,000    126,000    882,000     307,000    234,000    163,000      90,000
Payments for Labor and raw materials      90,000      90,000    126,000     882,000    307,000    234,000    163,000
Cash gain or loss for month
Collections    204,600    360,900     532,800    657,000    414,000    333,000
Payments for Labor and raw materials      90,000    126,000     882,000    307,000    234,000    163,000
General and administrative salaries      28,000      28,000        28,000      28,000      28,000      28,000
Lease payments        9,000        9,000          9,000        9,000        9,000        9,000
Miscellaneous expenses        2,800        2,800          2,800        2,800        2,800        2,800
Income tax payments                 -                -        62,000                -                -      62,000
Desig studio payments                 -                 -                 -    180,000                 -                 -
Total payments    129,800    165,800     983,800    526,800    273,800    264,800
Net cash gain (loss) during month      74,800    195,100 (451,000)    130,200    140,200      68,200 Collections less Total payments
Loan requirement or cash surplus
Cash at start of month    132,000    206,800     401,900    (49,100)      81,100    221,300
Cumulative cash    206,800    401,900     (49,100)      81,100    221,300    289,500 Net cash gain (loss) plus Cash at start of month
Target cash balance      90,000      90,000        90,000      90,000      90,000      90,000
Cumulative surplus cash or loan outstanding to maintain $90,000 target cash    116,800    311,900 (139,100)      (8,900)    131,300    199,500 Cumulative cash less Target cash balance
Prepare monthly estimates of the required financing or excess funds
July     116,800
Aug     311,900
Sep (139,100)
Oct        (8,900)
Nov     131,300
Dec     199,500


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