90.2K

Verified Solution

Link Copied!

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 2021 and 2022: May 2021 $140,000 June 140,000 July 280,000 August 420,000 September 560,000 October 280,000 November 280,000 December 70,000 January 2022 140,000 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 2021 $70,000 June 70,000 July 84,000 August 644,000 September 238,000 October 182,000 November 126,000 December 70,000 General and administrative salaries are approximately $30,000 a month. Lease payments under long-term leases are $10,000 a month. Depreciation charges are $40,000 a month. Miscellaneous expenses are $3,000 a month. Income tax payments of $57,000 are due in September and December. A progress payment of $175,000 on a new design studio must be paid in October. Cash on hand on July 1 will be $134,000, 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 2021. All payments and expenses should be entered as positive numbers. Net cash losses, negative cash balance, negative cumulative cash, and cumulative loans outstanding, if any, should be indicated by a minus sign. July August September October November December 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. 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. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Answer & Explanation Solved by verified expert

See Answer