Agreement to Repay Cash Advance

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					                                                   1
Cash Budget
 Used to determine monthly needs and surpluses for
  cash during the planning period
 Examines timing of cash inflows and outflows i.e.
  when checks are written and when deposits are
  made.
 Payments to suppliers are typically made some time
  after shipment is received.
 Receipts from credit customers are received some
  time after sale is recorded.
                                                                              2
Cash Budget
 Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures. Taxes are due in March and amount to $10,000. As of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet the bank’s line of credit
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
balance exceeds the minimum desired balance of $25,000. Prepare a cash
budget for Halsey.
                                                                             3
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January         $120,000          March $140,000
         February        $260,000          April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
    percent of of January Sales
75Collectionits final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures. Taxes are due in March and amount to $10,000. As of
           Nov        Dec           Jan            Feb            Mar
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
 Sales 130,000       125,000      120,000        260,000        140,000
month. They have a policy to repay short term debt in any month its cash
                                   36,000
balance exceeds the minimum desired balance of $25,000. Prepare a cash
budget for Halsey.
                              120,000x.30
                                                                             4
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January         $120,000          March $140,000
         February        $260,000          April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
    percent of of January Sales
75Collectionits final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures. Taxes are due in March and amount to $10,000. As of
           Nov        Dec           Jan            Feb            Mar
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
 Sales 130,000       125,000      120,000        260,000        140,000
month. They have a policy to repay short term debt in any month its cash
                                   36,000          60,000
balance exceeds the minimum desired balance of $25,000. Prepare a cash
budget for Halsey.
                              120,000x.30      120,000x.50
                                                                             5
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January         $120,000          March $140,000
         February        $260,000          April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
    percent of of January Sales
75Collectionits final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures. Taxes are due in March and amount to $10,000. As of
           Nov        Dec           Jan            Feb            Mar
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
 Sales 130,000       125,000      120,000        260,000        140,000
month. They have a policy to repay short term debt in any month its cash
                                   36,000          60,000         24,000
balance exceeds the minimum desired balance of $25,000. Prepare a cash
budget for Halsey.
                              120,000x.30      120,000x.50      120,000x.20
                                                                             6
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
  Determine January Collections
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)
budget for Halsey.
         2nd Month (20%)                                    120,000x.30
         Total Collections
                                                                             7
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
  Determine January Collections
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500
budget for Halsey.
         2nd Month (20%)                              125,000x.50
         Total Collections
                                                                             8
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
  Determine January Collections
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500
budget for Halsey.
         2nd Month (20%)                  26,000            130,000x.20
         Total Collections
                                                                             9
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
  Determine January Collections
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500
budget for Halsey.
         2nd Month (20%)                  26,000
         Total Collections                124,500
                                                                             10
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
                              Determine
$130,000 and $125,000, respectively. February Collections
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500
budget for Halsey.
         2nd Month (20%)                  26,000
         Total Collections     260,000x.30124,500
                                                                             11
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
                              Determine
$130,000 and $125,000, respectively. February Collections
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000
budget for Halsey.
         2nd Month (20%)                  26,000
         Total Collections     120,000x.50124,500
                                                                             12
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
                              Determine
$130,000 and $125,000, respectively. February Collections
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000
budget for Halsey.
         2nd Month (20%)                  26,000       25,000
         Total Collections     125,000x.20124,500
                                                                             13
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
                              Determine
$130,000 and $125,000, respectively. February Collections
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000
budget for Halsey.
         2nd Month (20%)                  26,000       25,000
         Total Collections                124,500 163,000
                                                                             14
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
                                 Determine 20 percent two months
month following the sale, and the remainingMarch Collections following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000         140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000       42,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000
budget for Halsey.                           140,000x.30
         2nd Month (20%)                  26,000       25,000
         Total Collections                124,500 163,000
                                                                             15
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
                                 Determine 20 percent two months
month following the sale, and the remainingMarch Collections following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000         140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000       42,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000     130,000
budget for Halsey.                           260,000x.50
         2nd Month (20%)                  26,000       25,000
         Total Collections                124,500 163,000
                                                                             16
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
                                 Determine 20 percent two months
month following the sale, and the remainingMarch Collections following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000         140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000       42,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000      130,000
budget for Halsey.                           120,000x.20
         2nd Month (20%)                  26,000       25,000       24,000
         Total Collections                124,500 163,000
                                                                             17
Cash Budget
Problem-- Determine Collections
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April   $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. TheCash Budget one month after delivery.
                                   supplier is paid
                                Halsey Enterprises
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                   November are due in January February
for other expenditures. Taxes December March and amount to $10,000. As of
                                                                    March
December 31, 1995 the company’s cash balance was $28,000; a minimum
          of $25,000 must be maintained120,000 bank’s line of credit
balanceSales       130,000 125,000         to meet 260,000         140,000
         Collections:
agreement. Halsey can borrow short term from its bank at a cost of 1/2% per
month. They have a policy to repay short term debt in any month its cash
         Month of Sale (30%)              36,000       78,000       42,000
          exceeds the minimum desired balance of $25,000. Prepare a cash
balanceFirst Month (50%)                  62,500       60,000      130,000
budget for Halsey.
         2nd Month (20%)                  26,000       25,000       24,000
         Total Collections                124,500 163,000          196,000
                                                                             18
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
    other expenditures. Taxes are due in March and amount to $10,000. As of
forPayments for January Purchases
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
           Nov          Dec          Jan                           Mar
agreement. Halsey can borrow short term from itsFeb at a cost of 1/2% per
                                                      bank
month. They have a policy to repay short term debt in any month its cash
                        minimum 120,000
balance exceeds the125,000 desired balance 260,000
 Sales 130,000                                     of $25,000. Prepare a cash
                                                                 140,000
budget for Halsey.
           90,000
                                    75% of January Sales Purchased in
                                    November
                                                                             19
Cash Budget
Problem
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
    other expenditures. Taxes are due in March and amount to $10,000. As of
forPayments for January Purchases
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
           Nov          Dec          Jan                           Mar
agreement. Halsey can borrow short term from itsFeb at a cost of 1/2% per
                                                      bank
month. They have a policy to repay short term debt in any month its cash
                        minimum 120,000
balance exceeds the125,000 desired balance 260,000
 Sales 130,000                                     of $25,000. Prepare a cash
                                                                 140,000
budget for Halsey.
           90,000
                       90,000       75% of January Sales Purchased in
                                    November, Paid for in December
                                                                            20
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                              Determine January amount to $10,000. As of
for other expenditures. Taxes are due in March andPayments
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
                             Cash Budget
                          borrow short term from its260,000x.75 of 1/2% per
agreement. Halsey can Halsey Enterprises              bank at a cost
month. They have a policy to repay short term debt in any month its cash
             November December January of $25,000. March
balance exceeds the minimum desired balance February Prepare a cash       April
budget for Halsey.
   Sales      130,000      125,000    120,000       260,000 140,000 140,000
   Purchases               195,000
   Payments                           195,000
                                                                            21
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                              Determine February Payments
for other expenditures. Taxes are due in March and amount to $10,000. As of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
                             Cash Budget
                          borrow short term from its140,000x.75 of 1/2% per
agreement. Halsey can Halsey Enterprises              bank at a cost
month. They have a policy to repay short term debt in any month its cash
             November December January of $25,000. March
balance exceeds the minimum desired balance February Prepare a cash       April
budget for Halsey.
   Sales      130,000      125,000    120,000       260,000 140,000 140,000
   Purchases               195,000    105,000
   Payments                           195,000       105,000
                                                                            22
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
                              Determine March Payments
for other expenditures. Taxes are due in March and amount to $10,000. As of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
                             Cash Budget
                          borrow short term from its140,000x.75 of 1/2% per
agreement. Halsey can Halsey Enterprises              bank at a cost
month. They have a policy to repay short term debt in any month its cash
             November December January of $25,000. March
balance exceeds the minimum desired balance February Prepare a cash       April
budget for Halsey.
   Sales      130,000      125,000    120,000       260,000 140,000 140,000
   Purchases               195,000    105,000       105,000
   Payments                           195,000       105,000 105,000
                                                                            23
Cash Budget
Problem-- Determine Material Purchases
Halsey Enterprises has projected its sales for the first four months of 1996 as
follows:
         January           $120,000         March $140,000
         February          $260,000         April    $140,000
Halsey collects 30 percent of its sales in the month of sale, 50 percent in the
month following the sale, and the remaining 20 percent two months following
the sale. During November and December of 1995 Halsey’s sales were
$130,000 and $125,000, respectively.
Halsey purchases raw materials two months in advance of its sales equal to
75 percent of its final sales. The supplier is paid one month after delivery.
In addition, Halsey pays $2,000 per month for rent and $12,000 each month
for other expenditures. Taxes are due in March and amount to $10,000. As of
December 31, 1995 the company’s cash balance was $28,000; a minimum
balance of $25,000 must be maintained to meet bank’s line of credit
                             Cash Budget
                          borrow short term from its bank at a cost of 1/2% per
agreement. Halsey can Halsey Enterprises
month. They have a policy to repay short term debt in any month its cash
             November December January of $25,000. March
balance exceeds the minimum desired balance February Prepare a cash       April
budget for Halsey.
   Sales      130,000      125,000    120,000       260,000 140,000 140,000
   Purchases               195,000    105,000       105,000
   Payments                           195,000       105,000 105,000
                                                              24
Cash Budget
Problem-- Cash Inflows & Outflows
                        Cash Budget
                      Halsey Enterprises
                                 January February    March
    Cash Collections            124,500 163,000     196,000
    Material Payments           195,000 105,000     105,000




                  Summary of Previous Sheets
                                                              25
Cash Budget
Problem-- Cash Inflows & Outflows
                        Cash Budget
                      Halsey Enterprises
                                 January February     March
    Cash Collections            124,500 163,000     196,000
    Material Payments           195,000 105,000     105,000
    Other Payments:
    Rent                          2,000   2,000       2,000
    Other Expenses              12,000   12,000      12,000
    Tax Payments               0              0      10,000
                  Remaining Cash Outflows
                                                               26
Cash Budget
Problem-- Cash Inflows & Outflows
                         Cash Budget
                       Halsey Enterprises
                                  January February     March
    Cash Collections             124,500 163,000     196,000
    Material Payments            195,000 105,000     105,000
    Other Payments:
    Rent                           2,000   2,000       2,000
    Other Expenses                12,000  12,000      12,000
    Tax Payments                       0       0      10,000
    Net Monthly Change          (84,500)  44,000      67,000
                                                                27
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February    March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000
    Ending Cash (No Borrow)
    Needed (Borrowing)
    Loan Repayment
    Interest Cost
    Ending Cash Balance
    Cumulative Borrowing
                                                                28
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                 January    February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000
    Ending Cash (No Borrow)     (56,500)
    Needed (Borrowing)
    Loan Repayment
    Interest Cost
    Ending Cash Balance
    Cumulative Borrowing
                                                                    29
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000
    Ending Cash (No Borrow)     (56,500)
    Needed (Borrowing)
    Loan Repayment                          Target Ending Balance
    Interest Cost
    Ending Cash Balance         25,000
    Cumulative Borrowing
                                                                30
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000
    Ending Cash (No Borrow)     (56,500)
    Needed (Borrowing)          81,500
    Loan Repayment
    Interest Cost
                                             Borrowing Required to
    Ending Cash Balance         25,000
                                             cover Minimum Balance
    Cumulative Borrowing
                                             and Deficit
                                               56,500+25,000
                                                                31
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February    March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000
    Ending Cash (No Borrow)     (56,500)
    Needed (Borrowing)          81,500
    Loan Repayment              0
    Interest Cost               0
    Ending Cash Balance         25,000
    Cumulative Borrowing        81,500
                                                                32
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000
    Needed (Borrowing)          81,500
    Loan Repayment              0
    Interest Cost               0
    Ending Cash Balance         25,000
    Cumulative Borrowing        81,500
                                                                  33
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000
    Needed (Borrowing)          81,500           0
    Loan Repayment              0
    Interest Cost               0
    Ending Cash Balance         25,000      25,000
    Cumulative Borrowing        81,500
                                                Target Ending Balance
                                                                   34
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February      March
    Net Monthly Change          (84,500)    44,000        67,000
    Beginning Cash Balance      28,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000
    Needed (Borrowing)          81,500           0
    Loan Repayment              0
    Interest Cost               0              408
    Ending Cash Balance         25,000      25,000
    Cumulative Borrowing        81,500


                                  Interest Incurred on Prior
                                  Month Borrowing
                                    81,500 x .005
                                                                 35
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January    February   March
    Net Monthly Change          (84,500)     44,000     67,000
    Beginning Cash Balance      28,000       25,000
    Ending Cash (No Borrow)     (56,500)     69,000
    Needed (Borrowing)          81,500            0
    Loan Repayment              0            43,592
    Interest Cost               0               408
    Ending Cash Balance         25,000       25,000
    Cumulative Borrowing        81,500


                       Amount that can be
                       repaid from monthly
                       surplus
                       69,000 - 408 - 25,000
                                                                36
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000
    Needed (Borrowing)          81,500           0
    Loan Repayment              0           43,592
    Interest Cost               0              408
    Ending Cash Balance         25,000      25,000
    Cumulative Borrowing        81,500      37,908


                 New Loan Balance
                 81,500 - 43,592
                                                                37
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000      25,000     25,000
    Ending Cash (No Borrow)     (56,500)    69,000     92,000
    Needed (Borrowing)          81,500           0
    Loan Repayment              0           43,592
    Interest Cost               0              408
    Ending Cash Balance         25,000      25,000
    Cumulative Borrowing        81,500      37,908
                                                                    38
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February    March
    Net Monthly Change          (84,500)    44,000      67,000
    Beginning Cash Balance      28,000      25,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000      92,000
    Needed (Borrowing)          81,500           0           0
    Loan Repayment              0           43,592
    Interest Cost               0              408          190
    Ending Cash Balance         25,000      25,000
    Cumulative Borrowing        81,500      37,908


                                             Interest Incurred on Prior
                                             Month Borrowing
                                               37,908 x .005
                                                                39
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000      25,000     25,000
    Ending Cash (No Borrow)     (56,500)    69,000     92,000
    Needed (Borrowing)          81,500           0          0
    Loan Repayment              0           43,592     37,908
    Interest Cost               0              408        190
    Ending Cash Balance         25,000      25,000
    Cumulative Borrowing        81,500      37,908

                                  Repay Outstanding Loan
                                  Balance
                                                                  40
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February    March
    Net Monthly Change          (84,500)    44,000      67,000
    Beginning Cash Balance      28,000      25,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000      92,000
    Needed (Borrowing)          81,500           0           0
    Loan Repayment              0           43,592      37,908
    Interest Cost               0              408         190
    Ending Cash Balance         25,000      25,000      53,902
    Cumulative Borrowing        81,500      37,908           0



                                            Ending Cash Balance
                                              92,000-37,908-190
                                                                  41
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February    March
    Net Monthly Change          (84,500)    44,000      67,000
    Beginning Cash Balance      28,000      25,000      25,000
    Ending Cash (No Borrow)     (56,500)    69,000      92,000
    Needed (Borrowing)          81,500           0           0
    Loan Repayment              0           43,592      37,908
    Interest Cost               0              408         190
    Ending Cash Balance         25,000      25,000      53,902
    Cumulative Borrowing        81,500      37,908           0



                                            Ending Cash Balance


                                              $28,902 Surplus
                                                                42
Cash Budget
Problem-- Analysis of Borrowing Needs
                         Cash Budget
                       Halsey Enterprises
                                  January   February   March
    Net Monthly Change          (84,500)    44,000     67,000
    Beginning Cash Balance      28,000      25,000     25,000
    Ending Cash (No Borrow)     (56,500)    69,000     92,000
    Needed (Borrowing)          81,500           0          0
    Loan Repayment              0           43,592     37,908
    Interest Cost               0              408        190
    Ending Cash Balance         25,000      25,000     53,902
    Cumulative Borrowing        81,500      37,908          0

  Halsey needs to raise $81,500 in short term debt in
  January, would probably take out a short term bank loan.
  In March has a 28,902 surplus, would probably invest in
  marketable securities at this point in time
43

				
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