Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop.
Busin
cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers.
as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prep
Christmas, when needs will be especially high.
Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays
$2,800 per month. In addition, she must make a tax payment of $14,000 in December. The current cash on hand
maintain an average bank balance of $6,000 - this is her target cash balance. (Disregard the amount in the cash re
small amount on hand in order to lessen the chances of robbery.)
The estimated sales and purchases for December, January, and February are shown below. Purchases during Nov
Sales Purchases
December $160,000 $25,000
January 46,000 25,000
February 56,000 25,000
Prepare a cash budget for December, January, and February. Do not round intermediate calculations. Round your
should be indicated by a minus sign.
Collections and Purchases:
December January February
Sales (Collections) $ $ $
Purchases $ $ $
Payments for purchases $ $ $
Salaries $ $ $
Rent $ $ $
Taxes $ --- ---
Total payments $ $ $
Cash at start of forecast $ --- ---
Net cash flow $ $ $
Cumulative cash balance $ $ $
Target cash balance $ $ $
Surplus cash or loans needed $ $ $
Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customer
are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The
Do not round intermediate calculations. Round your answer to the nearest dollar.
5)
Koehl's Doll Shop
Koehl's Salary $4,800
Rent $2,800
Tax Payment $14,000 December
Cash on Hand $650
Average Bank Account Balance $6,000 Min. Cash Balance
November Purchases $110,000
December January February
Sales $160,000 $46,000 $56,000
Purchases $25,000 $25,000 $25,000
a)
December January February
Sales $160,000 $46,000 $56,000
Purchases $25,000 $25,000 $25,000
Payments for Purchases $110,000 $25,000 $25,000
Salaries $4,800 $4,800 $4,800
Rent $2,800 $2,800 $2,800
Taxes $14,000 $0 $0
Total Payments $131,600 $32,600 $32,600
Cash at Start of Forecast $650 $29,050 $42,450
Net Cash Flow $28,400 $13,400 $23,400
Cumulative NCF $29,050 $42,450 $65,850
Target Cash Balance $6,000 $6,000 $6,000
Surplus Cash or Loans Needed $23,050 $36,450 $59,850
b)
Cash Inflow in December $0
Loan Requirements at End of December $136,950
, Koehl's Doll Shop. Business has been good, but Koehl frequently runs out of
a problem with suppliers. Koehl plans to borrow from the bank to have cash ready
she has asked you to prepare a cash budget for the critical period around
owing month. Koehl pays herself a salary of $4,800 per month, and the rent is
The current cash on hand (on December 1) is $650, but Koehl has agreed to
d the amount in the cash register, which is insignificant because Koehl keeps only a
ow. Purchases during November amounted to $110,000.
calculations. Round your answers to the nearest dollar. Negative values, if any,
days to pay. All customers accept these terms, and all other facts in the problem
er in this case? (Hint: The calculations required to answer this part are minimal.)
