Cash budget?) The Sharpe? Corporation's projected sales for the first 8 months of 2016 are shown...

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Cash budget?) The Sharpe? Corporation's projected sales for thefirst 8 months of 2016 are shown in the following? table:
January
?$190,000
May
?$300,000
February
??$120,000
June
??$270,000
March
??$135,000
July
??$225,000
April
??$240,000
August
??$150,000
Of? Sharpe's sales, 30 percent is for? cash, another 50 percentis collected in the month following the? sales, and 20 percent iscollected in the second month following sales. November andDecember sales for 2015 were $220,000 and $175,000 respectively.Sharpe purchases its raw materials 2 months in advance of itssales. The purchases are equal to 55 percent of the final salesprice of? Sharpe's products. The supplier is paid 1 month after itmakes a delivery. For? example, purchases for April sales are madein? February, and payment is made in March. In? addition, Sharpepays $ 9,000 per month for rent and $20,000 each month for otherexpenditures. Tax prepayments of $21,000 are made each?quarter,beginning in March. The? company's cash balance on December? 31,2015, was $22,000. This is the minimum balance the firm wants tomaintain. Any borrowing that is needed to maintain this minimum ispaid off in the subsequent month if there is sufficient cash.Interest on? short-term loans? (12 percent) is paid monthly.Borrowing to meet estimated monthly cash needs takes place at thebeginning of the month.? Thus, if in the month of April the firmexpects to have a need for an additional? $60,500, these fundswould be borrowed at the beginning of April with interest of? $605(0.12times×?1/12times×?$60,500) owed for April and paid at thebeginning of May.
a. Prepare a cash budget for Sharpe covering the first 7 monthsof 2016.
Fill in the Collections for the month of? January:???(Round tothe nearest? dollar.)
Nov
Dec
Jan
Feb
Mar
Apr
May
June
July
Sales
?$220,000
?$175,000
?$190,000
?$120,000
?$135,000
?$240,000
?$300,000
?$270,000
?$225,000
?Collections:
??Month of sale
?(30?%)
??First month
?(50?%)
??Second month
?(20?%)
?????Total Collections
?
b. Sharpe has? $200,000 in notes payable due in July that mustbe repaid or renegotiated for an extension. Will the firm haveample cash to repay the? notes?

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Answer a)


	Nov	Dec	Jan	Feb	Mar	Apr	May	June	July
Sales	$220,000	$175,000	$190,000	$120,000	$135,000	$240,000	$300,000	$270,000	$225,000
?Collections:
??Month of sale(30%)	$66,000	$52,500	$57,000	$36,000	$40,500	$72,000	$90,000	$81,000	$67,500
??First month(50%)		$110,000	$87,500	$95,000	$60,000	$67,500	$120,000	$150,000	$135,000
??Second month(20%)			$44,000	$35,000	$38,000	$24,000	$27,000	$48,000	$60,000
?Total Collections	$66,000	$162,500	$188,500	$166,000	$138,500	$163,500	$237,000	$279,000	$262,500

?Expenditure:
Purchase(55% of next two month sales paid one month after purchase)	($96,250)	($104,500)	($66,000)	($74,250)	($132,000)	($165,000)	($148,500)	($123,750)	($82,500)
TAX payment					($21,000)			($21,000)
Interest on additional cash
Total Expenditure			($66,000)	($74,250)	($153,000)	($165,000)	($148,500)	($144,750)	($82,500)
Net Cash position			$122,500	$91,750	-$14,500	-$1,500	$88,500	$134,250	$180,000
Cash Balance			$22,000	$144,500	$236,250	$221,750	$220,250	$308,750	$443,000
Additional cash

Total cash balance		$22,000	$144,500	$236,250	$221,750	$220,250	$308,750	$443,000	$623,000

Answer b) As the company has $623,000 as net cash balance at end of July , Sharpe can pay back? its $200,000 notes in the said month of July

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Transcribed Image Text

Cash budget?) The Sharpe? Corporation's projected sales for thefirst 8 months of 2016 are shown in the following? table:January?$190,000May?$300,000February??$120,000June??$270,000March??$135,000July??$225,000April??$240,000August??$150,000Of? Sharpe's sales, 30 percent is for? cash, another 50 percentis collected in the month following the? sales, and 20 percent iscollected in the second month following sales. November andDecember sales for 2015 were $220,000 and $175,000 respectively.Sharpe purchases its raw materials 2 months in advance of itssales. The purchases are equal to 55 percent of the final salesprice of? Sharpe's products. The supplier is paid 1 month after itmakes a delivery. For? example, purchases for April sales are madein? February, and payment is made in March. In? addition, Sharpepays $ 9,000 per month for rent and $20,000 each month for otherexpenditures. Tax prepayments of $21,000 are made each?quarter,beginning in March. The? company's cash balance on December? 31,2015, was $22,000. This is the minimum balance the firm wants tomaintain. Any borrowing that is needed to maintain this minimum ispaid off in the subsequent month if there is sufficient cash.Interest on? short-term loans? (12 percent) is paid monthly.Borrowing to meet estimated monthly cash needs takes place at thebeginning of the month.? Thus, if in the month of April the firmexpects to have a need for an additional? $60,500, these fundswould be borrowed at the beginning of April with interest of? $605(0.12times×?1/12times×?$60,500) owed for April and paid at thebeginning of May.a. Prepare a cash budget for Sharpe covering the first 7 monthsof 2016.Fill in the Collections for the month of? January:???(Round tothe nearest? dollar.)NovDecJanFebMarAprMayJuneJulySales?$220,000?$175,000?$190,000?$120,000?$135,000?$240,000?$300,000?$270,000?$225,000?Collections:??Month of sale?(30?%)??First month?(50?%)??Second month?(20?%)?????Total Collections?b. Sharpe has? $200,000 in notes payable due in July that mustbe repaid or renegotiated for an extension. Will the firm haveample cash to repay the? notes?

January	?$190,000	May	?$300,000
February	??$120,000	June	??$270,000
March	??$135,000	July	??$225,000
April	??$240,000	August	??$150,000