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    Koehl's Doll Shop

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    mobinil1
    Koehl's Doll Shop needs a cash budget to forecast cash needs around the busy Christmas period. The shop runs on cash basis and frequently runs out of cash, causing supplier issues. Sales are high in December but purchases must be paid for the following month. The budget forecasts a cash shortage in December that can be met through a bank loan. If customers are given 30 days credit, the loan need increases due to delayed cash inflows.

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    Koehl's Doll Shop

    Uploaded by

    mobinil1
    161 views3 pages
    Koehl's Doll Shop needs a cash budget to forecast cash needs around the busy Christmas period. The shop runs on cash basis and frequently runs out of cash, causing supplier issues. Sales are high in December but purchases must be paid for the following month. The budget forecasts a cash shortage in December that can be met through a bank loan. If customers are given 30 days credit, the loan need increases due to delayed cash inflows.

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    Solution to Koehl's Doll Shop Problem

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    Koehl's Doll Shop needs a cash budget to forecast cash needs around the busy Christmas period. The shop runs on cash basis and frequently runs out of cash, causing supplier issues. Sales are high in December but purchases must be paid for the following month. The budget forecasts a cash shortage in December that can be met through a bank loan. If customers are given 30 days credit, the loan need increases due to delayed cash inflows.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    161 views3 pages

    Koehl's Doll Shop

    Uploaded by

    mobinil1
    Koehl's Doll Shop needs a cash budget to forecast cash needs around the busy Christmas period. The shop runs on cash basis and frequently runs out of cash, causing supplier issues. Sales are high in December but purchases must be paid for the following month. The budget forecasts a cash shortage in December that can be met through a bank loan. If customers are given 30 days credit, the loan need increases due to delayed cash inflows.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    Koehl's Doll Shop frequently runs low on cash and needs to borrow money from the bank. A cash budget is being prepared for December, January, and February to forecast cash needs.

    The cash budget involves forecasting sales, purchases, payments for salaries, rent, taxes and determining the net cash flow, cumulative cash balance and surplus cash/loan needs for each month.

    Koehl's Doll Shop often runs out of cash, causing issues with suppliers. Koehl plans to borrow from the bank to have enough cash on hand. She has asked for a cash budget to be prepared for the critical period around the holiday season.

    Dorothy Koehl recently leased space in the Southside Mall and opened a new business, Koehl's Doll Shop.

    Busin
    cash. This has necessitated late payment on certain orders, which is beginning to cause a problem with suppliers.
    as needed, but first she needs a forecast of how much she should borrow. Accordingly, she has asked you to prep
    Christmas, when needs will be especially high.
    Sales are made on a cash basis only. Koehl's purchases must be paid for during the following month. Koehl pays
    $2,800 per month. In addition, she must make a tax payment of $14,000 in December. The current cash on hand
    maintain an average bank balance of $6,000 - this is her target cash balance. (Disregard the amount in the cash re
    small amount on hand in order to lessen the chances of robbery.)
    The estimated sales and purchases for December, January, and February are shown below. Purchases during Nov
    Sales Purchases
    December $160,000 $25,000
    January 46,000 25,000
    February 56,000 25,000
    Prepare a cash budget for December, January, and February. Do not round intermediate calculations. Round your
    should be indicated by a minus sign.
    Collections and Purchases:
    December January February
    Sales (Collections) $ $ $

    Purchases $ $ $

    Payments for purchases $ $ $


    Salaries $ $ $
    Rent $ $ $
    Taxes $ --- ---
    Total payments $ $ $

    Cash at start of forecast $ --- ---


    Net cash flow $ $ $
    Cumulative cash balance $ $ $
    Target cash balance $ $ $
    Surplus cash or loans needed $ $ $
    Suppose that Koehl starts selling on a credit basis on December 1, giving customers 30 days to pay. All customer
    are unchanged. What would the company's loan requirements be at the end of December in this case? (Hint: The
    Do not round intermediate calculations. Round your answer to the nearest dollar.

    5)
    Koehl's Doll Shop
    Koehl's Salary $4,800
    Rent $2,800
    Tax Payment $14,000 December
    Cash on Hand $650
    Average Bank Account Balance $6,000 Min. Cash Balance
    November Purchases $110,000

    December January February


    Sales $160,000 $46,000 $56,000
    Purchases $25,000 $25,000 $25,000

    a)
    December January February
    Sales $160,000 $46,000 $56,000
    Purchases $25,000 $25,000 $25,000
    Payments for Purchases $110,000 $25,000 $25,000
    Salaries $4,800 $4,800 $4,800
    Rent $2,800 $2,800 $2,800
    Taxes $14,000 $0 $0
    Total Payments $131,600 $32,600 $32,600
    Cash at Start of Forecast $650 $29,050 $42,450
    Net Cash Flow $28,400 $13,400 $23,400
    Cumulative NCF $29,050 $42,450 $65,850
    Target Cash Balance $6,000 $6,000 $6,000
    Surplus Cash or Loans Needed $23,050 $36,450 $59,850

    b)
    Cash Inflow in December $0
    Loan Requirements at End of December $136,950
    , Koehl's Doll Shop. Business has been good, but Koehl frequently runs out of
    a problem with suppliers. Koehl plans to borrow from the bank to have cash ready
    she has asked you to prepare a cash budget for the critical period around

    owing month. Koehl pays herself a salary of $4,800 per month, and the rent is
    The current cash on hand (on December 1) is $650, but Koehl has agreed to
    d the amount in the cash register, which is insignificant because Koehl keeps only a

    ow. Purchases during November amounted to $110,000.

    calculations. Round your answers to the nearest dollar. Negative values, if any,

    days to pay. All customers accept these terms, and all other facts in the problem
    er in this case? (Hint: The calculations required to answer this part are minimal.)

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