Quote:
Sales 120,000 (nov) 140,000(dec) 190,000(jan ) 210,000(march) 230,00 (apr)
Collections-cash
(30%) 36,000(nov) 42,000(dec) 57,000(jan) 63,000(feb) 69,000(march)
Collections (40%) 36,600(dec) 39,200(jan) 53,200(feb) 58,000(march)
Collections (60%) 50,400(jan) 58,800(feb) 79,800(march)
Yes, that helps a great deal figure out what's what. It's all correct, except that the 40% collected in March is 58,800. (210,000 Feb sales less 30% cash, leaves 147,000 on account, and 40% is 58,800.)
The issue that remains is that you need to not put Nov & Dec on the final report. You can put that info as a footnote, like to show how you did the calculations, but it does not belong on the cash budget for the 1st quarter. Only include Jan through March for that. Also, the sales probably should not be on the final report either. Again, that can be included in a calculation section, but it's not part of cash collections. (You seem to not be getting the difference between the sales and the cash collections, but more on that below.)
In the long run, if you have an example of one of these, follow it regardless of what I say, especially if you have a picky instructor.
Quote:
Payments for Material
Purchases 38,000(jan) 42,000(feb) 48,000(march)
(20%- paid in cash
The month of sales)
Labor Expense (50% of sales) 95,000(jan) 105,000(feb) 115,000(march)
Selling and Admin. Exp.
(5% of sales) 9,500(jan) 10,500(feb) 11,500(march)
Overhead 12,000(march)
Taxes 20,000(march)
Dividends 16,000(march)
Total expense 142,500(jan) 157,500 (feb) 220,500 (march)
Real darn close. You dumped the non-cash depreciation. :D However, you also dumped overhead out of Jan & Feb, and that does belong there. Notice it says "per month," not "in March" like the taxes and divdends say. Get the overhead back into Jan & Feb and you'll be good to go on this section. For something like the depreciation, you have to be keeping your mind on cash and realize depreciation isn't a cash payment. (They throw that in to make sure you get that.) But something like the overhead is a matter of just reading the problem carefully. Take it literally.
Quote:
Net Cash Flow 47,500 (jan) 52,500 (feb) 9,500 (march)
You're having the same issue here that I spoke of in the last post and haven't fixed yet. You're still using SALES from the top section to figure this out. SALES isn't CASH flow. You're labeling this "net cash flow" but sales isn't cash flow. I already explained this and can only repeat myself. CASH, CASH, CASH. You never totaled your cash collections in the top section, which is something you should do.
Net CASH flow is the cash incoming less the cash outgoing. You're subtracting the cash outgoing, but you're subtracting it from sales. That's not the cash inflows. You're sticking 70% of the sales into receivables - how can that match cash inflows? The entire point of doing that first section is to get the CASH collections.
Have I stressed the word CASH enough yet? ;)
Quote:
Beginning Cash Balance 70,000(jan) 22,500(feb) 29,500 (march)
Cumulative Cash Balance 22,500(jan) 29,500(feb) 20,000 (march)
Borrowing
(65,000-Cumulative cash balance) 42,500(jan) 35,500(feb) 45,000(march)
OK, this is all messed up. Stop thinking about accounting for a minute and think about your bank account. That's all this is. A bank account is an everyday sort of thing that most people have, and there's nothing special about it for accounting.
If you have a positive net cash flow and a beginning balance of 70,000, how do you end up with less money than you started with? You should actually end up with a negative cash flow (once you get the idea that you need to be using cash collections and not sales), but as of now, you have a positive, so we need to make sure you get this concept. Plus it could be positive in the future. Positive cash flows don't reduce balances.
Also, pretending 22,500 is correct, if you borrwed 42,500 to get the balance up to 65,000, then wouldn't you have 65,000 to carry over into February? You almost have the idea on that, but you do actually have the cash you borrowed. So you'd be carrying over the 65,000.
The borrowing idea you've got right. Once you've corrected a couple of other things, that should work out OK.
As an example, let's say your beginning balance is $100, and you have a negative cash flow of $130 for January, and your minimum balance is $50. I'm then going to carry that into an example February and March:
January:
Cash flow (130) (use parenthesis for any negatives)
Beginning balance 100
Ending balance (30)
Borrowings 80
Adjusted ending balance 50 (the minimum)
February:
Cash flow (10)
Beginning balance 50
Ending balance 40
Borrowings 10
Adjusted ending balance 50
March:
Cash flow 30
Beginning balance 50
Ending balance 80
Repayment (30) (cause you have the extra cash and can still stick with the minimum)
Adjusted ending balance 50
I still haven't done that last part for this problem so I don't know how this comes out yet, but that's just an example of some of the stuff that can happen and how you would handle it.
