Harrison Printing has projected its sales for the first eight months of 2014 as follows:

Harrison collects 20 percent of its sales in the month of the sale, 50 percent in the month following the sale, and the remaining 30 percent two months following the sale. During November and December of 2013, Harrison’s sales were $220,000 and $175,000, respectively.
Harrison purchases raw materials two months in advance of its sales equal to 65 percent of its final sales price. The supplier is paid one month after delivery. Thus, purchases for April sales are made in February and payment is made in March. In addition, Harrison pays $10,000 per month for rent and $20,000 each month for other expenditures. Tax prepayments of $22,500 are made each quarter beginning in March. The company’s cash balance as of December 31, 2013, was $22,000; a minimum balance of $20,000 must be maintained at all times to satisfy the firm’s line-of-credit agreement with its bank. Harrison has arranged with its bank for short-term credit at an interest rate of 12 percent per annum (1 percent per month) to be paid monthly. Borrowing to meet estimated monthly cash needs takes place at the end of the month, and interest is not paid until the end of the following month. Consequently, if the firm were to need to borrow $50,000 during the month of April, then it would pay $500 (5 .01 3 $50,000) in interest during May. Finally, Harrison follows a policy of repaying its outstanding short-term debt in any month in which its cash balance exceeds the minimum desired balance of $20,000.
a. Harrison needs to know what its cash requirements will be for the next six months so that, if necessary, it can renegotiate the terms of its short-term credit agreement with its bank. To analyze this problem, the firm plans to evaluate the impact of a ±20 percent variation in its monthly sales efforts. Prepare a six-month cash budget for Harrison and use it to evaluate the firm’s cash needs.
b. Harrison has a $200,000 note due in June. Will the firm have sufficient cash to repay theloan?

January February March April $100,000 May 120,000 June 150,000 July 300,000 August $275,000 200,000 200,000 180,000