Of sharpes sales 10 percent is for cash another 60 percent

Reference no: EM13596856

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 ______________

Reference no: EM13596856

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