Question

cash budget, income statement and balance sheet

Garden Sale December 11, 2017 25.200 Account Payable Working Cane Ng Paya 112.500 53.000 12,000 5 Prepaid Rem $ Prop. Plant & top Accum Depr 900 DOO (100.000 800.000 Commons Retained tamnings 200.000 772300 5 Net PPLES Total Assets You are the Business Manager of Garden Sales, Inc and the bank has asked you to prepare a cash and carnings budget/forecast and Pro-Forma Balance Sheet and Income Statement for the next quarter. After your discussion with the various departments, you have come up with the following information/assumptions: • November 2017 and December 2017 sales were $100,000, each month • Sales for the following three months will increase $2,000 each month, beginning January through April Cost of Sales represents 60% of sales, each month. Cash Operating Expenses are 15% of sales, exclusive of Depreciation expense Depreciation Expense is $7,500 per month and prepaid rent is amortized at $2,000 per month • Of the month's sales, 25% is collected as cash with the remaining placed on customer's account. • Customer's accounts are usually paid off over a 2-month period (50% each month) beginning the month following the sale • The CFO just informed you that one customer has filed bankruptcy therefore, $10,000 from Nov A/R Sales will be written off in Jan to Bad Debt Exp. • The company purchases 100% of the next month's cost of sales. They pay for 60%, in cash, in the month they purchase and pay the remaining 40% in the following month. In March, the company is planning on replacing an outdated machine. The new machine will cost $40,000. The old machine originally cost $30,000, with a Net Book Value of $10,000 and will be sold for $7,500 The Company does not pay or accrue for taxes until the end of December The Company plans to pay a cash dividend of $15,000 at the end of March. Assume all operating expenses incurred during the month are paid, in cash, during the same month incurred The Note Payable requires a principal payment of $5,000, plus interest of $500, at the end of March. For this note, no interest is Accrued/Expense until interest is paid The minimum cash month end balance required according to the bank agreement will $80,000 for any given month beginning Jan 2018 A working capital line of credit is available, up to $100,000, and if needed, money is taken out at the beginning of the month. Interest is 1per month. Interest in not compounded. • Interest is paid on the working capital line when principal payments are paid on the debt; at the end of any given month. • Interest is accrued on the working capital line effective the beginning of the month when money is received • Any excess cash estimated at the end of the month will be used to pay the working capital line balance and associated interest at the end of the month. 1. Prepare a detailed Cash Budget/Forecast for each month of Jan, Feb and March, 2018 2. Prepare an Income Statement for the 3-month period ending March 2018 (good form) 3. Prepare a Balance Sheet as of March 31, 2018 (good form) Check Figures for 03/31 4. Assignment must be turned in as HAND WRITTEN document. Total Interest Exp: $767.34 Total Assets: $1,076,800.00

Answer 1

Garden Sales Inc. Notes Nov-17 Cash Budget Forecast Opening Cash Balance Cash Sales Recovery from Customers Payment for Cost of Sales Cash Operating Expense Machine Cost Dividend Notes Payable Cash Balance after recovery and payments Minimum Cash Balance Requirement Working Capital Loan Repayment of Working Capital Principal Payment of Interest on w/C Loan Closing Cash Balance Dec-17Jan-18Feb-18 60000 80000 2550026000 65000 75750 61920 63120 15300 15600 Note-1 Note-6 Note-7 Note-3 Note- 8 Note-9 Note-10 Mar-18 96175.6 26500 77250 64320 15900 32500 15000 5500 66705.6 80000 13294.4 73280 80000 6720 Note- 11 Note-11 Note-11 103030 80000 0 6720 134.4 96175. 6 0 80000 80000 Note - 1 Sales Forecast Total Sales Cash Sales 25% Transferred to customer A/C Nov-17 100000 25000 75000 Dec-17 100000 25000 75000 Jan-18 102000 25500 76500 Feb-18 104000 26000 78000 Mar-18 106000 26500 79500 Apr-18 108000 27000 81000 Note-2 Cost of Sales Forecast COS Nov-17 60000 Dec-17 60000 Jan-18 61200 Feb-18 62400 Mar-18 63600 Apr-18 64800 Note-3 Cash Operating Expense COE Jan-18 15300 Feb-18 15600 Mar-18 15900 Apr-18 16200 Note-4 Depreciation Jan-18 7500 Feb-18 7500 Mar-18 7500 Apr-18 7500 Dep. Note-5 Amoratisation of Rent (Non-Cash) AOR Jan-18 2000 Feb-18 2000 Mar-18 2000 Apr-18 2000 Note-6 Recovery from Customers RFC Nov-17 Feb-18 Mar-18 Apr-18 Dec-17 Jan-18 37500 37500 37500 37500 38250 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Total 38250 39000 39000 39750 78750 0 37500 75750 77250 Less: Bad Debts Net RFC 75000 10000 65000 0 37500 75750 77250 78750 Apr-18 Note - 7 Cash Spend on Cost of Sales Cash Pay (60% of Next months COS) Balance Following Month Total Nov-17 36000 Dec-17 Jan-18 Feb-18 Mar-18 36720 374403816038880 24000 24480 24960 2 5440 6072061920 63120 64320 25920 25920 36000

Mar-18 Note-8 Cash for New machine Spend on New Machine Receipt from sales of old machine 40000 7500 32500 Note -9 Dividend Div Mar-18 15000 Note-10 Notes payable Principal Interest Mar-18 5000 500 5500 Note-11 Working Capital Line Principal Outstanding Working Capital Loan Repayment of Working Capital Principal Closing Balance Interest Outstanding Interest for the Period Payment of Interest on W/C Loan Closing Balance Jan-18 Feb-18 Mar-18 067200 6720 13294.4 0 6720 6720 0 13294.4 67.2 0 67.2 67.2 132.94 134.4 67.2 0 132.944

Ignore Note 4 Above; amended Note 4 is given with the income statement

Income Statement for the Period ending March 18 Notes 2018 Jan-Ma Income: Sales Total Income Note 1 312000 312000 Note 2 Note 3 Note 4 Note 5 Note 5 187200 46800 22,583.33 6000 10000 Expenses: Cost of Sales Operating Expenses Depreciation Rent Bad Debts Interest Interest on Notes Interest on Working Capital Line Loss on Sale of old machine Total Expenses Profit Before Tax and Dividend Taces Dividend Profit Transferred to Balance Sheet Note 10 Note 11 (10000-7500) 500 267.34 767.34 2500 275850.68 36149.323 As per Applicable Rate Note 9 15000 21149.323 Jan-18 Feb-18 Mar-18 Note-4 Depreciation Asset Cost Yearly Depreciation % of Dep 900000 (7500x 12) 900000 90000 900000 40000 30000 910000 Asset Cost in Mach Add: New Purchase Less Old Sold Cost of Block % of Dep Depreciation Monthly Depreciation Depreciation 91000 7,583.33 7500 7500 7,583.33

Notes Garden Sales Inc. Balance sheet at the End of March 31, 2018 Asset Notes Amount Liabilities Cash Cach Budget 20,000.00 Accounting Payable Accounts Receivable Note 1&6 1,18,500.00 Working Capital Line Inventory Note 2 63,000.00 Interest Payable on Working Capital Line Prepaid Rent Note 5 6,000.00 Notes Payable Property Plant and Equipment Note 8 9,10,000.00 Common Stock Accumulated Depreciation -1,02,583.33 Retained Earning Net PP&E 8,07,416.67 Amount 23040 13294.4 132.944 45000 200000 7,93,449.32 Total Assets 10,74,916.57 10,74,916.57 Note Inventory value is unchanged Depreciaiton figure is to be changed for month of march.