Chapter 15 Problem 2 James Buchanan Orthotics and Prosthetics isplanning to request a line of credit from its bank. The company hasproduced sales estimates, and these appear in the worksheet below.Collection estimates are as follows: 10 percent within the month ofsale, 75 percent in the month following the sale, and 15 percent inthe second month following the sale. Labor and supplies estimatesalso appear in the worksheet below. Payments for labor and suppliesare typically made during the month following the one in whichthese costs have been incurred. General and administrative salarieswill amount to approximately $27,000 a month; lease payments underlong-term lease contracts will be $9,000 a month; depreciationcharges will be $36,000 a month; miscellaneous expenses will be$2,700 a month; income tax payments of $63,000 will be due in bothSeptember and December; and a progress payment of $180,000 on a newbuilding must be paid in October. Cash on hand on July 1 willamount to $132,000, and a minimum cash balance of $90,000 will bemaintained throughout the cash budget period. What loan will be thecompany require in October? May June July August September OctoberNovember 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 daysTotal 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 administrativesalaries Lease payments Miscellaneous expenses Taxes Progresspayment Total payments Net cash gain/loss Borrowing/surplussummary: Cash at beginning with no borrowing Cash at end with noborrowing Target cash balance (given) Cumulative surplus cash /loan balance

Chapter 15 Problem 2

James Buchanan Orthotics and Prosthetics is planning to requesta line of credit from its bank. The company has produced salesestimates, and these appear in the worksheet below. Collectionestimates are as follows: 10 percent within the month of sale, 75percent in the month following the sale, and 15 percent in thesecond month following the sale. Labor and supplies estimates alsoappear in the worksheet below. Payments for labor and supplies aretypically made during the month following the one in which thesecosts have been incurred. General and administrative salaries willamount to approximately $27,000 a month; lease payments underlong-term lease contracts will be $9,000 a month; depreciationcharges will be $36,000 a month; miscellaneous expenses will be$2,700 a month; income tax payments of $63,000 will be due in bothSeptember and December; and a progress payment of $180,000 on a newbuilding must be paid in October. Cash on hand on July 1 willamount to $132,000, and a minimum cash balance of $90,000 will bemaintained throughout the cash budget period. What loan will be thecompany 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