Prepare for a cash budget: The Sharpe Corporation’s projected sales for the first eight months of 2014 are as follows:

January $90,000

February $120,000

March 135,000

April 240,000

May $300,000

June 270,000 

July 225,000

August 150,000

Of Sharpe’s sales 10 percent is for cash, another 60 percent is collected in the month following the sale, and 30 percent is collected in the second month following the sale. November and December sales for 2013 were $220,000 and $175,000, respectively.

Sharpe purchases its raw material 2 months in advance of its sales equal to 60 percent of the final sales price .The supplier is paid 1 month after it makes delivery. For example, purchases for April sales are made in February and payment is made in March.

In addition, Sharpe pays $10,000 per month for rent and $20,000 each month for other expenditures. Tax prepayments of $22,500 are made each quarter, beginning in March.

The company’s cash balance at December 31, 2013 was $22,000; a minimum balance of 15,000 must be maintained at all times. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interests on short term loans (12 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month. Thus if the month of April the firm expects to have a need for an additional $60500, these funds would be borrowed at the beginning of April with interest of $605 (ie…12*1/12*60500) owed for April being paid at the beginning of may

a. Prepare a cash budget for Sharpe covering the first 7 months of 2014.

b. Sharpe has $200,000 in notes payable due July that must be repaid or renegotiated for an extension. Will the firm have sufficient cash to repay the notes?

Please answer in excel