The Amber Magick Shoppe has forecast its sales revenues and purchases for the last 5 months of 2008 to be as follows:
August Sales 22000 Purchases 17000
September Sales 15000 Purchases 19500
October Sales 25000 Purchases 29000
November Sales 30000 Purchases 20000
December Sales 26000 Purchases 24000
60% of sales are on credit. On the basis of past experience 50% of the accounts receivable are collected the month after the sale and the remainder are
collected 2 months after the sale. Purchases are paid 30 days after they are incurred. The firm has a cash balance of $5000 on hand as of September 30th and
its minimum required cash balance is $4000.
A. Prepare a schedule of cash receipts for October Novemeber and December.
B. Prepare a cash budget for the same period.
C. Is there a need to borrow? How much? When? When will borrowing be paid back?