Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr. Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures: Actual Forecast November December $420,000 January 440,000 February March Additional Information $500,000 April forecast $550,000 540,000 100,000 Of the firm's sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 35 percent of sales and are purchased and received each month in an amount sufficient to cover the current month's expected sales. Materials are paid for in the month they are received. Labour expense is 45 percent of sales and is paid in the month of sales. Selling and administrative expense Is 4 percent of sales and is also paid in the month of sales. Overhead is $35,000 in cash per month; amortization expense is $11,100 per month. Taxes of $9100 will be paid in January and dividends of $7.500 will be paid in March. Cash at the beginning of January is $102,000 and the minimum desired cash balance is $97,000. a. Prepare a schedule of monthly cash receipts for January, February and March. Jim Daniels Health Products Cash Receipts Schedule November $420000 December $440000 January $500000 February $540000 March $560000 April $550000 Sales Credit sales Cash sales Collections in the month after credit sales Collections two months after credit sales Total cash receipts
Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr. Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures: Actual Forecast November December $420,000 January 440,000 February March Additional Information $500,000 April forecast $550,000 540,000 100,000 Of the firm's sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 35 percent of sales and are purchased and received each month in an amount sufficient to cover the current month's expected sales. Materials are paid for in the month they are received. Labour expense is 45 percent of sales and is paid in the month of sales. Selling and administrative expense Is 4 percent of sales and is also paid in the month of sales. Overhead is $35,000 in cash per month; amortization expense is $11,100 per month. Taxes of $9100 will be paid in January and dividends of $7.500 will be paid in March. Cash at the beginning of January is $102,000 and the minimum desired cash balance is $97,000. a. Prepare a schedule of monthly cash receipts for January, February and March. Jim Daniels Health Products Cash Receipts Schedule November $420000 December $440000 January $500000 February $540000 March $560000 April $550000 Sales Credit sales Cash sales Collections in the month after credit sales Collections two months after credit sales Total cash receipts
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Jim Daniels Health Products has eight stores. The firm wants to expand by two more stores and needs a bank loan to do this. Mr.
Hewitt, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through
March. Following are actual and forecasted sales figures:
Actual
Forecast
November
December
$420,000 January
440,000 February
March
Additional Information
$500,000 April forecast $550,000
540,000
100,000
Of the firm's sales, 40 percent are for cash and the remaining 60 percent are on credit. Of credit sales, 30 percent are paid in the
month after sale and 70 percent are paid in the second month after the sale. Materials cost 35 percent of sales and are purchased and
received each month in an amount sufficient to cover the current month's expected sales. Materials are paid for in the month they are
received. Labour expense is 45 percent of sales and is paid in the month of sales. Selling and administrative expense Is 4 percent of
sales and is also paid in the month of sales. Overhead is $35,000 in cash per month; amortization expense is $11,100 per month. Taxes
of $9100 will be paid in January and dividends of $7.500 will be paid in March. Cash at the beginning of January is $102,000 and the
minimum desired cash balance is $97,000.
a. Prepare a schedule of monthly cash receipts for January, February and March.
Jim Daniels Health Products
Cash Receipts Schedule
November
$420000
December
$440000
January
$500000
February
$540000
March
$560000
April
$550000
Sales
Credit sales
Cash sales
Collections in the month after credit sales
Collections two months after credit sales
Total cash receipts
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