Harry’s Carryout Stores has eight locations. The firm wishes to expand by two more stores and...

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Finance

Harry’s Carryout Stores has eight locations. The firm wishes toexpand by two more stores and needs a bank loan to do this. Mr.Wilson, the banker, will finance construction if the firm canpresent an acceptable three-month financial plan for Januarythrough March. The following are actual and forecasted salesfigures:

Actual Forecast Additional Information
November $440,000 January $520,000 April forecast $460,000
December 460,000 February 560,000
March 470,000
Of the firm’s sales, 50 percent are for cash and the remaining50 percent are on credit. Of credit sales, 50 percent are paid inthe month after sale and 50 percent are paid in the second monthafter the sale. Materials cost 35 percent of sales and arepurchased and received each month in an amount sufficient to coverthe following month’s expected sales. Materials are paid for in themonth after they are received. Labor expense is 50 percent of salesand is paid for in the month of sales. Selling and administrativeexpense is 5 percent of sales and is also paid in the month ofsales. Overhead expense is $25,000 in cash per month.

Depreciation expense is $11,200 per month. Taxes of $9,200 will bepaid in January, and dividends of $8,000 will be paid in March.Cash at the beginning of January is $104,000, and the minimumdesired cash balance is $99,000.
a. Prepare a schedule of monthly cash receiptsfor January, February, and March.

Harry’s Carryout Stores
Cash Receipts Schedule
November December January February March
Sales
Credit sales
Cash sales
One month after sale
Two months after sale
Total cash receipts $0 $0 $0
b. Prepare a schedule of monthly cash paymentsfor January, February, and March.

Harry’s Carryout Stores
Cash Payments Schedule
January February March
Payments for purchases
Labor expense
Selling and administrative
Overhead
Taxes
Dividends
Total cash payments $0 $0 $0

c. Prepare a monthly cash budget with borrowingsand repayments for January, February, and March. (Negativeamounts should be indicated by a minus sign. Assume the Januarybeginning loan balance is $0.)
Harry’s Carryout Stores
Cash Payments Schedule
January February March
Total cash receipts
Total cash payments
Net cash flow 0 0 0
Beginning cash balance
Cumulative cash balance 0 0 0
Monthly loan (or repayment)
Ending cash balance 0 0 0
Cumulative loanbalance

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Harry's Carryout Store Cash Receipts Schedule
	November	December	January	February	March
Sales	$ 440,000	$ 460,000	$ 520,000	$ 560,000	$ 470,000
Credit Sales	220,000	230,000	260,000	280,000	235,000
Cash Sales	220,000	230,000	260,000	280,000	235,000
One Month After Sale	0	110,000	115,000	130,000	140,000
Two Months After Sale	0	0	110,000	115,000	130,000
Total Cash Receipts			$ 485,000	$ 525,000	$ 505,000

Harry's Carryout Stores Cash Payments Schedule
	January	February	March
Payments for Purchases	$ 182,000	$ 196,000	$ 164,500
Labor Expense	260,000	280,000	235,000
Selling and Administrative Expense	26,000	28,000	23,500
Overhead Expense	25,000	25,000	25,000
Taxes	9,200	0	0
Dividends	0	0	8,000
Total Cash Payments	$ 502,200	$ 529,000	$ 456,000

Harry's Carryout Stores Cash Budget
	January	February	March
Total Cash Receipts	$ 485,000	$ 525,000	$ 505,000
Total Cash Payments	- 502,200	- 529,000	- 456,000
Net Cash Flow	- 17,200	- 4,000	49,000
Beginning Cash Balance	104,000	99,000	99,000
Cumulative Cash Balance	86,800	95,000	148,000
Monthly Loan ( or Repayment)	12,200	4,000	(16,200)
Ending Cash Balance	99,000	99,000	131,800
Cumulative Loan Balance	12,200	16,200	0

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Transcribed Image Text

Harry’s Carryout Stores has eight locations. The firm wishes toexpand by two more stores and needs a bank loan to do this. Mr.Wilson, the banker, will finance construction if the firm canpresent an acceptable three-month financial plan for Januarythrough March. The following are actual and forecasted salesfigures: ActualForecastAdditional InformationNovember$440,000January$520,000April forecast$460,000December460,000February560,000March470,000Of the firm’s sales, 50 percent are for cash and the remaining50 percent are on credit. Of credit sales, 50 percent are paid inthe month after sale and 50 percent are paid in the second monthafter the sale. Materials cost 35 percent of sales and arepurchased and received each month in an amount sufficient to coverthe following month’s expected sales. Materials are paid for in themonth after they are received. Labor expense is 50 percent of salesand is paid for in the month of sales. Selling and administrativeexpense is 5 percent of sales and is also paid in the month ofsales. Overhead expense is $25,000 in cash per month. Depreciation expense is $11,200 per month. Taxes of $9,200 will bepaid in January, and dividends of $8,000 will be paid in March.Cash at the beginning of January is $104,000, and the minimumdesired cash balance is $99,000.a. Prepare a schedule of monthly cash receiptsfor January, February, and March. Harry’s Carryout StoresCash Receipts ScheduleNovemberDecemberJanuaryFebruaryMarchSalesCredit salesCash salesOne month after saleTwo months after saleTotal cash receipts$0$0$0b. Prepare a schedule of monthly cash paymentsfor January, February, and March. Harry’s Carryout StoresCash Payments ScheduleJanuaryFebruaryMarchPayments for purchasesLabor expenseSelling and administrativeOverheadTaxesDividendsTotal cash payments$0$0$0c. Prepare a monthly cash budget with borrowingsand repayments for January, February, and March. (Negativeamounts should be indicated by a minus sign. Assume the Januarybeginning loan balance is $0.)Harry’s Carryout StoresCash Payments ScheduleJanuaryFebruaryMarchTotal cash receiptsTotal cash paymentsNet cash flow000Beginning cash balanceCumulative cash balance000Monthly loan (or repayment)Ending cash balance000Cumulative loanbalance

Actual		Forecast		Additional Information
November	$440,000	January	$520,000	April forecast	$460,000
December	460,000	February	560,000
		March	470,000