The Sharpe Corporation: Detailed cash flow budget for the first seven

QUESTION

The Sharpe Corporation: Detailed cash flow budget for the first seven months of 2004The Sharpe Corporations projected sales for the first eight months of 2004 are as follows:January $90,000February &
November December January February March April May June July Sales $2,20,000 $1,75,000 $90,000 $1,20,000 $1,35,000 $2,40,000 $3,00,000 $2,70,000 $2,25,000 Collections: Cash 10% $9,000 $12,000 $13,500 $24,000 $30,000 $27,000 $22,500 First Month 60% $1,05,000 $54,000 $72,000 $81,000 $1,44,000 $1,80,000 $1,62,000 Second month 30% $66,000 $52,500 $27,000 $36,000 $40,500 $72,000 $90,000 Total Collections $1,80,000 $1,18,500 $1,12,500 $1,41,000 $2,14,500 $2,79,000 $2,74,500 Purchases (60% of next months sales) $72,000 $81,000 $1,44,000 $1,80,000 $1,62,000 $1,35,000 $90,000 Payments (one month lag) $72,000 $81,000 $1,44,000 $1,80,000 $1,62,000 $1,35,000 Cash Budget Cash Receipts Collections $1,80,000 $1,18,500 $1,12,500 $1,41,000 $2,14,500 $2,79,000 $2,74,500 Cash Disbursements Purchases $72,000 $81,000 $1,44,000 $1,80,000 $1,62,000 $1,35,000 $90,000 Rent $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 Other expenses $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Taxes $22,500 $22,500

Interest expense on existing debt $605 $386 Total disbursements $1,02,000 $1,11,000 $1,96,500 $2,10,000 $1,92,605 $1,87,886 $1,20,000 Net monthly change $78,000 $7,500 -$84,000 -$69,000 $21,895 $91,114 $1,54,500 Plus:beginng cash balance $22,000 $1,00,000 $1,07,500 $23,500 $15,000 $15,000 $67,509 Financing Needed(Repayment) $60,500 -$21,895 -$38,605 Ending cash balance $1,00,000 $1,07,500 $23,500 $15,000 $15,000 $67,509 $2,22,009 Cumulative borrowing $0 $0 $0 $60,500 $38,605 $0 $0 b) The firm will have sufficient funds to cover the $200,000 note payable due in July. In fact, if the firms estimates are realized they will have $222,009 in cash by the end of July

ANSWER:

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