4-6A.

(Cash budget) The Sharpe Corporation’s projected sales for the first eight months of 2004 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 sale, and 30 percent is collected in the second month
following sale. November and December sales for 2003 were $220,000 and $175,000, respectively. Sharpe purchases its raw materials
two months in advance of its sales equal to 60 percent of their final sales price. The supplier is paid one 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, 2003, was $22,000; a minimum balance of
$15,000
4-6A. (a) The Sharpe Corporation Cash Budget Worksheet

Nov Dec Jan Feb Mar Apr May June July

Sales $220,000 $175,000 $ 90,000 $120,000 $135,000 $240,000 $300,000 $270,000 $225,000
Collections:
Month of sale (10%) 9,000 12,000 13,500 24,000 30,000 27,000 22,500
First month (60%) 105,000 54,000 72,000 81,000 144,000 180,000 162,000
Second month (30%) 66,000 52,500 27,000 36,000 40,500 72,000 90,000
Total Collections 180,000 118,500 112,500 141,000 214,500 279,000 274,500
Purchases 72,000 81,000 144,000 180,000 162,000 135,000 90,000 75,000
Payments (one month lag) 72,000 81,000 144,000 180,000 162,000 135,000 90,000
Cash Receipts
(collections) 180,000 118,500 112,500 141,000 214,500 279,000 274,500
Cash Disbursements
Purchases 72,000 81,000 144,000 180,000 162,000 135,000 90,000
Rent 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Other Expenditures 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Tax Deposits 22,500 22,500
Interest on Short-Term
Borrowing _______ _______ _______ _______ 605 386 _______
Total Disbursements $102,000 $111,000 $196,500 $210,000 $192,605 $187,886 $120,000
Net Monthly Change $78,000 $7,500 ($84,000) ($69,000) $21,895 $91,114 $154,500
Beginning Cash Balance 22,000 100,000 107,500 23,500 15,000 15,000 67,509
Additional Financing
Needed (Repayment) ________ _______ ________ 60,500 (21,895) (38,605) _______
Ending Cash Balance $100,000 $107,500 $ 23,500 $15,000 $ 15,000 $ 67,509 $222,009
Cumulative Borrowing 0 0 0 $ 60,500 $ 38,605 0 0

(b) The firm will have sufficient funds to cover the $200,000 note payable due in July. In fact, if the firm's estimates are
realized they will have $222,009 in cash by the end of July.