# Agreement to Repay Cash Advance

Document Sample

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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
 Payments to suppliers are typically made some time
 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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