Of Sharpe's sales, 10 percent is for cash, another 60 percent is collected in the month following the sale, and 30 percent is collected in the following month following the sale. November and December sales for 2010 were $220,700 and $176,000 respectively. Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent of their final sale price. THe supplier is paid one month after it makes its delivery. For example, purchases for April sales are made in February and payment is made in March. In addition Sharpe pays $11,000 per month for rent and $19,900 each month for other expenditures. Tax prepayments of $23,500 are made each quarter beginning in March. The company's cash balance at December 21st 2012, was $22,500; a minimum balance of $15,000 must be maintained at all times. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short term loans (10 percent) is paid monthly. Borrowing to meet montly estimated cash needs takes place at the beginning of the month. THus if in the month of April, the fim expects to have a need for an additional $63,210, these funds would be borrowed at the beginning of April with interest of $519(i.e, 10% X 1/12 X$63,210) owed for April being paid at the beginning of May.
Prepare a cash budget for Sharpe covering the first 7 months of 2011
Complete Month by Month the cash budget below
November December January
Sales 220,700 176,000 91,000
- Cash Receipts
- Sales for cash (10%) _______
- First month after sales (60%) _______
- Second month after sales (30%) _______
- TOTAL CASH RECEIPTS _______
Cash Disbursements
- Raw Materials _______
- Rent _______
- Other Expenditures _______
- Tax Prepayments _______
- TOTAL CASH DISBURSEMENTS ________
Net Change in Cash
Net Change in Cash for Period ________
(+) Beginning Cash Balance ________
(-) Interest on Short-term borrowing ________
(-) Short term borrowing repayments ________
(=) Ending cash balance b/borrowing ________
NEW FINANCIAL NEEDED
Financing needed for period ______________
Ending Cash Balance $22,500 ______________
Cumulative Borrowing ______________