hampton
Note - 2 Projected Cash Budget, September 1979 through January 1980 (Thousands of Dollars) September October November December January receipts Collections of receivablesª $684 $1,323 $779 $1,604 $2,265 Bank Loan $350 Total Cash Flow $684 $1,673 $779 $1,604 $2,265 expenditures Payments of accounts payabled $948 $600 $600 $600 $600 Other Operating layouts $400 $400 $400 $400 $400 Capital expenditures $350 Tax payments $181 $181 Interest payments - bank loan $15 $15 $20 $20 $5 Principal payments - bank loan $1,000 350 Dividends $150 Total Cash Outflow $1,544 $1,365 $1,020 $2,351 $1,355 Baginning cash flow $1,559 $699 $1,007 $766 $19 Net Monthly cash flow ($860) $308 ($241) ($747) $910 Ending Cash balance $699 $1,007 $766 $19 $929 Note: Other assumptions stated in the case aAssumes a 30 - day collection period b$2,163 minus $840 advance=1323 c$1,505 minus $726 advance=799 dAssumes a 30 - day payable period (Thousands of Dollars) Sources Increase in Bank Debt $1,000 Increase in retained earnings $883 Decrease in Cash $961 Increase in Customer Advances $726 Increase in accounts payable $600 Decrease in accounts receivable $561 Increase in taxes payable $329 Decrease in net fixed assets $92 Decrease in prepaid expenses $20 Total Sources $5,172 Uses Stock Repurchase $3,000 increase in inventories $2,163 Decrfease in accruals $9 Total Uses $5,172 Note - 3 Pro - forma Income Statement, September 1979 through December 1979 (thousands of dollars) Derivation Sales $7,537 Projected sales for September, October, November, December Cost of Sales and other expenses $5,857 See note (a) Profit before taxes $1,680 Taxes $771 48% of profit before taxes minus $35 investment tax credit Profit after taxes $909 Dividends $150 Proposed december dividend Addition to retained earnings $759 a Since prepaid expenses and accrued expenses are assumed to be unchanged, other expenses are equal to other expenditures Threfore, Total costs ═ Cost of sales + Other expenditures Total costs ═ "Reduction in Work - in process inventories" + "Reduction in raw materials inventories" + "Four months' purchases" + Depreciation + "Four months' other outlays" + "Four months' interest" $5,857 ═ $1,320 + $420 + $2,400 + $47 + $1,600 + $70 Depreciation of new machines: $ 350 straight - line for eight years = $43. 75 or $3. 65 per month Depreciation for September - December = Four months on old equipment plus two months on new equipment $ 47 = $40 + $ 7