The Oxford Company has budgeted sales revenues as follows.
Jan Feb Mar
Credit sales $240,000 $192,000 $144,000
Cash sales 144,000 408,000 312,000
Total sales 384,000 600,000 456,000
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.
Purchases of inventory are all on credit, with 60% paid in the month of purchase and 40% in the month following purchase. Budgeted inventory purchases are $520,000 in January, $360,000 in February, and $168,000 in March.
Other budgeted cash receipts include
(a) the sale of plant assets for $98,800 in February and
(b) the sale of new common stock for $134,800 in March.
Other budgeted cash disbursements include
(a) operating expenses of $54,000 each month,
(b) selling and administrative expenses of $100,000 each month,
(c) dividends of $152,000 to be paid in February, and
(d) purchase of equipment for $48,000 cash in March.
The company has a cash balance of $80,000 at the beginning of February and wishes to maintain a minimum cash balance of $80,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of February 1.
Use this information to prepare a schedule of expected cash payments for purchases of inventory for the months of February and March only.