I have a question about how to solve this in excel. I see that other students have posted their answers, but I want to know on how they got them so I can have a better understanding.

What I am not clear on is the assumptions. For example, the "Collections for the month(quarter)of sale says that it should be 80%, in the context below, but I see that some students got 60% instead. How did they come up with that number? If I follow the numbers in the context below, my answers are completely different. What am I missing here? I see that its monthly now because they want a 1-year cash budget, so that changes the quarterly to monthly. How does that affect the numbers? Thank you!

Chapter 6 Case Problem 1:KELLY'S BOUTIQUE

Kelly's Boutique is contemplating several means of financing their acquisition of $200,000 in special equipment. One alternative is to borrow $200,000 from a local bank for10 years at12 percent per annum. The bank has asked them to produce a1-year cash budget broken down by months (January through December). Sales of $40,000 are expected in the first month, with each month thereafter increasing 2 percent. Purchases are based on an expected cost of sales of 55 percent and a required ending inventory of 70 percent of next month's cost of sales. Beginning inventory was $11,000. Sales for January next year are expected to be $50,000. Sales in the previous November and December were $29,000 and $28,000, respectively. Expenses include advertising expense of $900, depreciation expense of $800, interest expense of $1,000, payroll expense of $8,000, supplies expense of $500, and utilities expense of $600 per month throughout the year. All expenses except depreciation are paid in the month during which they are incurred. Collections in the month of sale are expected tobe60 percent, collections in the first month following a sale 30 percent, and in the second month10 percent. Payments in the month of purchase are expected to be 75 percent, payments in the first month following a purchase15 percent, and payments in the second month to be10 percent. Purchases in the previous November and December were $16,000 and $17,000, respectively. Proceeds from the $200,000 loan are expected in June, and $200,000 of equipment will be purchased in July. Monthly payments of $1,400 on the loan also begin in July. The beginning cash balance in January was $15,000.

Using the ch6-04 file to start your work, I must create cash budget that is based on the assumptions listed in the previous paragraph. Use Excel's grouping feature to group operating cash receipts, operating cash payment, cash from (to) operating activities, cash from (to) investing activities, and cash from (to) financing activities and also to group the twelve monthly columns together. (Use equations in all cells, do not just put in numbers within the cell)

a.Print the newly completed worksheet in Value view, with your name and date printed in the lower left footer and the file name in the lower right footer.

b.Print the worksheet from part a, above, in Formula view, with your name and date printed in the lower left footer and the file name in the lower right footer. Print only columns A and B of the cash budget, no assumptions.

c.Collapse rows to level 2 and columns to level1, and then print the worksheet in Value view with your name and date printed in the lower left footer and the file name in the lower right footer. Print cash budget only, no assumptions.

d.Expand rows to level 3 and columns to level 2, and then use what-if analysis to calculate end-of-year cash if the sales growth each month were 4 percent and payroll expense were $18,000 per month. Print the resulting worksheet in Value view, with your name and date printed in the lower left footer and the file name in the lower right footer. Print cash budget only, no assumptions.

e.Undo the what-if analysis performed in part d. Use goal seek to determine what sales growth would be needed to produce an ending cash balance of $150,000. Print the resulting worksheet in Value view with your name and date printed in the lower left footer and the file name in the lower right footer. Print cash budget and assumptions.