4 5 Assigned Problem 1 6 James Buchanan Orthotics and Prosthetics is planning to request a line of credit from its bank. 7 The company has produced sales estimates, and these appear in the worksheet below. Collection 8 estimates are as follows: 10 percent within the month of sale, 75 percent in the month following 9 the sale, and 15 percent in the second month following the sale. Labor and supplies estimates also 10 appear in the worksheet below. Payments for labor and supplies are typically made during the 11 month following the one in which these costs have been incurred. General and administrative 12 salaries will amount to approximately $27,000 a month; lease payments under long-term lease 13 contracts will be $9,000 a month; depreciation charges will be $36,000 a month; miscellaneous 14 expenses will be $2,700 a month; income tax payments of $63,000 will be due in both September 15 and December; and a progress payment of $180,000 on a new building must be paid in October. 16 Cash on hand on July 1 will amount to $132,000, and a minimum cash balance of $90,000 will be 17 maintained throughout the cash budget period. What loan will the company require in 18 October? May June July August September October November December January $180,000 $180,000 $360,000 $540,000 $720,000 $360,000 $360,000 $90,000 $180,000 $0 $0 SO 19 20 ANSWER 21 22 Collections worksheet: 23 1. Billed charges 24 2. Collections 25 Within 30 days 26 30-60 days 27 60-90 days 28 3. Total collections 29 30 Supplies worksheet: 31 4. Amount of labor and supplies 32 5. Payments made for labor and supplies 33 34 Net cash gain (loss): 35 6. Total collections (line 3) 36 7. Total purchases (line 5) 37 8. General and administrative salaries 38 9. Lease payments 39 10. Miscellaneous expenses 40 11. Taxes 41 12. Progress payment 42 13. Total payments 43 14. Net cash gain(or loss) 44 $90,000 $90,000 $126,000 $882,000 $300,000 $234,000 $162,000 $90,000 SO SO $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 -$ $9,000 -$9,000 $9.000 $9,000 $9,000 -$9,000 $ $9.000 $9,000 $9,000 -$2,700 -$2,700 $2,700 -$2,700 $2,700 $2,700 $2,700 $2,700 $2,700 $63,000 $63,000 -$180,000 $132,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 $90,000 45 Borrowing/surplus summary: 46 15. Cash at beginning with no borrowing 47 16. Cash at end with no borrowing (line 14+15) 48 17. Target cash balance (given) 49 18. Cumulative surplus cash(or loan balance) 50 51 52 53 54 55 56