Question: Prepare a cash budget for Joes Bar and Grill based on the following information:
Sales are projected to be 100 in Jan, 150 in Feb, 300 in Mar and 100 in Apr.
Collections are 50% in the month of sale and 50% one month after the sale.
Collections one month after the sale are reduced by the credit card fee of 2%.
COGS is 30% of sales.
Joe has terms of "2/10 net 30" and pays in 30 days for all purchases.
Fixed costs include a fee for protection from Guido and Vito Arm and Leg Preservation services of 10 per month, Taxes of 10 per year to be paid in January, Rent of 2 per month and Utilities of 1 per month.
Minimum cash balance is 20.
Joe has a credit card he uses as his line of credit. It has a maximum limit of 20.
Is Joes line of credit adequate to run his business through the end of April?
Prove your answer by preparation of a cash budget, showing all work.