Question

13.00 Noce vete hai Acum Depr Contact Renderings 1140 You are the Business Manager of Garden Sales, Inc and the bank has asked you to prepare a cash and carings 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 lan 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 In March, the company is planning on replacing an outdated machine.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 1% per 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 for) 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

		CASH BUDGET :
		Collection in January from November Sales	$27,500	(50%*75000)-10000		($10000 being bad debt expense)
		BUDGET FOR CASH RECEIPTS
			November,17	December,17	January,18	February,18	March,18	April,18
	A	Sales Revenue	$100,000	$100,000	$102,000	$104,000	$106,000	$108,000
	B=A*25%	Cash sales	$25,000	$25,000	$25,500	$26,000	$26,500
	C=A-B	Credit sales	$75,000	$75,000	$76,500	$78,000	$79,500
	D	Collection from last months credit Sales			$37,500	$38,250	$39,000
	E	Collection from Credit Sales of two months ago			$27,500	$37,500	$38,250
	F=B+D+E	Total Cash Receipts			$90,500	$101,750	$103,750
		Payment made for previous month's Purchase in Jan	$25,200	(Balance in accounts payable in December)
		BUDGET FOR CASH DISBURSEMENT FOR PURCHASE
	G=60%*A	Cost of Sales			$61,200	$62,400	$63,600	$64,800
	H	Monthly Purchase			$62,400	$63,600	$64,800
	I=60%*H	Payment made in the month of purchase			$37,440	$38,160	$38,880
	J	Payment made for previous month's Purchase			$25,200	$24,960	$25,440
	K=I+J	Total Cash payment for Purchase			$62,640	$63,120	$64,320
		CASH BUDGET
			January,18	February,18	March,18
	a	Beginning Cash Balance	$60,000	$80,000	$102,956
	b	Cash Receipt	$90,500	$101,750	$103,750
	c=a+b	Total Cash Available	$150,500	$181,750	$206,706
		Cash Payments:
	d	Payment for Purchases	$62,640	$63,120	$64,320
	e	Replacement of machine in March(40000-7500)			$32,500
	f	Payment of cash dividend			$15,000
	g=A*15%	Cash Operating expenses	$15,300	$15,600	$15,900
	h	Cash disbursement for Notes Payable(5000+500)			$5,500
	i=d+e+f+g+h	Total Cash Payments	$77,940	$78,720	$133,220
	x	Interest expense	$0	$74	$0
	j=c-i-x	Excess/(Deficit) of Cash	$72,560	$102,956	$73,486
	k	Minimum Balance Required	$80,000	$80,000	$80,000
	l=k-j	Amount of Loan	$7,440	$0	$6,514
	m=j+l	Ending Cash Balance	$80,000	$102,956	$80,000