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(Preparation of a cash budget)

Lewis Printing has projected its sales for the first 8 months of 2016 as follows:

January;100,000;April;320,000;July;220,000 February;140,000;May;255,000;August;160,000 March;130,000;June;220,000

Lewis collects 30 percent of its sales in the month of the sale, 50 percent in the month following the sale, and the remaining 20 percent 2 months following the sale. During November and December of 2015, Lewis's sales were $240,000 and $175,000, respectively. Lewis purchases raw materials 2 months in advance of its sales. These purchases are equal to 65 percent of its final sales. The supplier is paid 1 month after delivery. Thus, purchases for April sales are made in February and payment is made in March. In addition, Lewis pays $12,000 per month for rent and $20,000 each month for other expenditures. Tax prepayments of $21,500 are made each quarter beginning in March. The company's cash balance as of December 31, 2015, was $30,000; a minimum balance of $20,000 must be maintained at all times to satisfy the firm's bank line of credit agreement. Lewis has arranged with its bank for short-term credit at an interest rate of 12 percent per annum (1 percent per month) to be paid monthly. Borrowing to meet estimated monthly cash needs takes place at the end of the month, and interest is not paid until the end of the following month. Consequently, if the firm needed to borrow$50,000 during April, then it would pay $500 (=0.01$50,000) in interest during May. Finally, Lewis follows a policy of repaying its outstanding short-term debt in any month in which its cash balance exceeds the minimum desired balance of $20,000.

a. Lewis needs to know what its cash requirements will be for the next 6 months so that it can renegotiate the terms of its short-term credit agreement with its bank, if necessary. To evaluate this problem, the firm plans to evaluate the impact of a 20 percent variation in its monthly sales efforts. Prepare a 6-month cash budget for Lewis and use it to evaluate the firm's cash needs.

(Prepare a cash budget for Lewis Printing covering the first 6 months of $21,500.)

Fill in the Collections for the month of January:(Round to the nearest dollar.)

	Nov	Dec	Jan	Feb	Mar	Apr	May	June
Sales	$240,000	$175,000	$100,000	$140,000	$130,000	$320,000	$255,000	$220,000
Collections:
Month of sale (30%)			enter your response here
First month (50%)			enter your response here
Second month (20%)			enter your response here
Total Collections ($)			enter your response here

b. Lewis has a $60,000 note due in June. Will the firm have sufficient cash to repay the loan?

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