Question

In-class Assessment - Thursday, November 14, 2019 The following information is available for the Barkery, a gourmet pet food and to Cod and toys store: 1. Balance sheet information as of September 30, 2019: $ 21,000 34.500 20.000 119,075 Current Assets Cash Accounts Receivable Inventory Equipment (net) Current Liabilities Accounts Payable Interest Payable Notes Payable Common stock Retained earnings 11.550 2,625 70,000 35.000 75,400 2. Recent and anticipated sales: August September October November December $70,000 $60,000 $90,000 $110,000 $130,000 3. Credit sales: Sales are 60% for credit and 40% cash. Assume that the credit accounts are collected 15% within the month of sale, 72% within the month following the sale, 11% within the second month following the sale and 2% is uncollectible and written off immediately as a bad debt. 4. Cost of goods sold is 55% of sales. We pay for 65% of the purchases in the month of purchase and the remaining 35% of the purchases in the month following the purchase. 5. Inventory is equal to $20,000 at all times. 6. Operating costs: Salaries and wages average 26% of monthly revenues, other monthly operating costs are $4,100. Assume that these costs are paid out each month. Depreciation is $720 per month. 7. The note payable is due on June 30, 2021. Accrue monthly interest at 5% per annum that will be paid with the note payable balance on June 30, 2021. 8. Assume that a minimum cash balance of $15.000 must be maintained. Assume also that all borrowing is effective at the beginning of the month and all repayments are made

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Sales Budget October November December Quarter $130,000 Budgeted Sales (value) $90,000 $110,000 $330,000 Expected Cash Collection A. October November December Quarter $54,000 $66,000 $198,000 Credit Sales $78,000 Collections $132,000 $44,000 Cash Sales Credit Sales August Sales September Sales October Sales November Sales $36,000 $52,000 $4,620 $29,880 $52,920 $57,420 $4,620 $3,960 $38,880 $25,920 $5,940 $8,100 $9,900 $47,520 December Sales Total Cash Collections $11,700 $288,540 $3,960 $11,700 $117,160 $1,560 $74,640 $96,740 Bad Debt written off during the quarter $1,080 $1,320 October November December Quarter $90,000 $49,500 $130,000 $71,500 Sales $110,000 $60,500 $330,000 $181,500 COGS-55% Inventory Purchase Budget October November December Quarter Budgeted COGS Add: Closing inventory Total Needs $49,500 $181,500 $20,000 $201,500 $20,000 $181,500 $60,500 $20,000 $80,500 $20,000 $60,500 $71,500 $20,000 $20,000 $69,500 $20,000 $49,500 $91,500 $20,000 $71,500 Less: Opening Inventory Purchase Budget Closing stock of month will be Opening stock of next month Expected Cash disbursements for Materials Purchases В. October November December Quarter September Purchase October Purchase November Purchase December Purchase $11,550 $49,500 $60,500 $46,475 $11,550 $17,325 $39,325 $32,175 $21,175 $46,475 $43,725 Total purchase payment to Vendors $56,650 $67,650$168,025 Operating Expenses С. November December $33,800 October Quarter Salaries and Wages Other Monthly Operating cost Cash disbursements for Operating expenses Depreciation Total Selling and administration expenses $23,400 $85,800 $12,300 $98,100 $2,160 $28,600 $4,100 $32,700 $720 $33,420 $4,100 $4,100 $27,500 $37,900 $720 $720 $28,220 $38,620 $100,260 Cash Budget Opening Balance Add: cash collections November December October D. Quarter $31,805 $21,000 $21,000 $24,415 $96,740 $121,155 $74,640 $95,640 $117,160 $288,540 $148,965$309, 540 Total cash available Less: cash disbursements $67,650 $168,025 $98,100 $56,650 $32,700 For inventory purchase For selling and administrative expense excluding depreciation $43,725 $27,500 $37,900 $105,550 $43,415 $266,125 Total cash disbursement Excess (deficiency of ) of cash available over disbursements Financing Borrowings Repayments Interest (at 1% per month) Total financing Closing Cash Balance $71,225 $89,350 $31,805 $43,415 $24,415 $0 $0 $0 $43,415 $24,415 $31,805 $43,415 Desired balance is maintained hence no need for borrowing Budgeted Income Statement for December 31st E. $330,000 Sales Les: Cost of Goods Sold $20,000 $181,500 $201,500 $20,000 Opening stock Add: Purchase Goods available for Sale Less: Closing Stock Cost of Goods sold $181,500 $148,500 Gross Margin Less: Operating expenses Selling and administrative expense $98,100 $2,160 $3,960 Depreciation Bad Debts $104,220 $44,280 Profit Before Interest Interest on Note payable $875 Net Operating Income $43,405 Budgeted Balance Sheet for Dcember 31st, 2019 F. Assets Current Assets $43,415 Cash Accounts receivable Inventory Total Current Assets Fixed Assets $72,000 $20,000 $135,415 Equipment Less: Depreciation during the Quarter $119,075 $2,160 $116,915 $252,330 Total Assets Liabilities and Stockholders' Equity Current Liabilities Accounts payable Interest payable on Long term Note Total Current Liabilities $25,025 $3,500 $28,525 Long term liability Long term note $70,000 Stockholders' Equity $35,000 $118,805 Common stock Retained Earnings Total Stockholders' Equity $153,805 $252,330 Total Liabilities and Stockholders' Equity Retained Earnings balance Opening balance Add: Net profit Closing balance of Retained earnings $75,400 $43,405 $118,805 Accounts receivable closing balance Opening Balance Add Sales Less: Collection $34,500 $330,000 -$288,540 -$3,960 $72,000 Less: Bad Debts Written off Closing Balance Accounts payable closing balance Opening Balance Add: Purchases $11,550 $181,500 -$168,025 $25,025 Less: Payment Closing Balance