Problem Set I
Essay Preview: Problem Set I
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4-20.
Juans Taco Company has restaurants in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr. Bryan, the banker, will finance construction if Juan can present an acceptable three-month financial plan for January through March. The following are actual and forecasted sales figures:
Actual
Forecast
Additional Information
November
$120,000
January
$190,000
April forecast
$230,000
December
140,000
February
210,000
March
230,000
Of Juans sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are paid for in cash. Labor expense is 50 percent of sales and its paid in the month of sales. Selling and administrative expense is 5 percent of sales and is also paid in the month of sale. Overhead expense is $12,000 in cash per month; depreciation expense is $25,000 per month. Taxes of $20,000 and dividends of $16,000 will be paid in March. Cash at the beginning of January is $70,000 and the minimum desired cash balance is $65,000.For January, February, and March, prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments.
4-20. Continued
Solution:
Juans Taco Company
Cash Receipts Schedule
November
December
January
February
March
April
Sales
$120,000
$140,000
$190,000
$210,000
$230,000
$230,000
Credit sales (70%)
84,000
98,000
133,000
147,000
161,000
161,000
Cash sales (30%)
36,000
42,000
57,000
63,000
69,000
69,000
Collections (month after credit sales) 40%
33,600
39,200
53,200
58,800
64,400
Collections (two months after credit sales) 60%
50,400
58,800
79,800
88,200
Total Cash Receipts
$146,600
$175,000
$207,600
Copyright Щ 2005 by The McGraw-Hill Companies, Inc.
4-20. Continued
Juans Taco Company
Cash Payments Schedule
January
February
March
Payments for Material Purchases (20% of current months sales)
$ 38,000
$ 42,000
$46,000
Labor Expense (50% of sales)
95,000
105,000
115,000
Selling and Admin. Exp. (5% of sales)
9,500
10,500
11,500
Overhead
12,000
12,000
12,000
Taxes
20,000
Dividends
16,000
Total Cash Payments*
$154,500
$169,500
$220,500
*The $25,000 of depreciation is excluded because it is not a cash expense.
Copyright Щ 2005 by The McGraw-Hill Companies, Inc.
4-20. Continued
Juans Taco Company
Cash Budget
January
February
March
Total Cash Receipts
$146,600
$175,000
$207,600