Question

The following information is available for the Barkery, a gourmet pet food and toys store: 1. Balance sheet information as of September 30, 2019: $ 21,000 28,140 20.000 119,075 Current Assets Cash Accounts Receivable Inventory Equipment (net) Current Liabilities Accounts Payable Interest Payable Notes Payable Common stock Retained earnings 13,500 3,375 90.000 35,000 46,340 2. Recent and anticipated sales: August September October November December $60,000 $50,000 $80,000 $100,000 $120,000 3. Credit sales: Sales are 70% for credit and 30% cash. Assume that the credit accounts are collected 25% within the month of sale, 65% within the month following the sale, 7% within the second month following the sale and 3% is uncollectible and written off immediately as a bad debt. 4. Cost of goods sold is 60% of sales. We pay for 55% of the purchases in the month of purchase and the remaining 45% 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 22% of monthly revenues, other monthly operating costs are $4,200. Assume that these costs are paid out each month. Depreciation is $700 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

Answer 1

Calculation Oct Oct Nov Dec Nov 100,000 Dec 120,000 Quarter 300,000 80,000 24,000 30,000 36,000 90,000 =80,000*30% =100,000*30% =120,000*30% Barkery Budgeted cash receipts Req A Sales Cash receipts Cash sales Credit sales receipts Aug sales Sep sales Oct sales Nov sales Dec sales Total Cash Collections 2,940 22,750 14,000 2,450 36,400 17,500 =60,000*70%*7% =50,000*70%*65% =80,000*70%*25% 2,940 25,200 54,320 63,000 21,000 256,460 =50,000*70%*7% =80,000*70%*65% =100,000*70%*25% 3,920 45,500 21,000 106,420 =80,000*70%*7% =100,000*70%*65% =120,000*70%*25% 63,690 86,350 Oct =80,000*60% Nov =100,000*60% Dec =120,000*60% Budgeted cash disbursements for Inventory Purchases ReqB Oct Nov Budgeted Cost of goods sold 48,000 60,000 Add Desired Ending Inventory 20,000 20,000 Inventory Needed 68,000 80,000 Less Beginning Inventory 20,000 20,000 Required Purchases 48,000 60,000 Dec 72,000 20,000 92,000 20,000 72,000 Quarter 180,000 20,000 200,000 20,000 180,000 End Inv of Oct End Inv of Nov 13,500 26,400 Cash disbursements for Inventory Sep Purchases Oct Purchases Nov Purchases Dec Purchases Total cash payments for Purchases =50,000*60%*45% -48,000*55% 21,600 33,000 33,000 48,000 13,500 48,000 60,000 39,600 161,100 -48,000*45% =60,000*55% 27,000 39,600 66,600 =60,000*45% =72,000*55% 39,900 54,600 Oct =80,000*22% Nov =100,000*22% Dec =120,000*22% Budgeted cash disbursements for Operating costs ReqC Oct Salaries and wages 17,600 Other operating costs 4,200 Total cash payments for Operating costs 21,800 Total cash payments for Purchases 39,900 Total cash payments 61,700 Nov 22,000 4,200 26,200 54,600 80,800 Dec 26,400 4,200 30,600 66,600 97,200 Quarter 66,000 12,600 78,600 161,100 239,700 Oct 21,000 63,690 84,690 Nov 22,990 86,350 109,340 Dec 28,540 106,420 134,960 Quarter 21,000 256,460 277,460 Cash budget ReqD Cash balance, beginning Add Cash collections Total cash available Less cash payments For Inventory purchases For Operating costs Total budgeted payments Cash balance, ending 39,900 21,800 61,700 22,990 54,600 26,200 80,800 28,540 66,600 30,600 97,200 37,760 161,100 78,600 239,700 37,760

Calculation 300,000 180,000 120,000 Income Statement ReqE Sales Cost of goods sold Gross Profit Operating expenses Salaries and wages Other operating costs Depreciation expense Bad debt expense Total Operating expenses Operating income Interest expense Net income 66,000 12,600 2,100 6,300 =700*3 =300,000*70%*3% 87,000 33,000 1,125 31,875 =90,000*5%*3/12 Balance Sheet ReqF Assets Current Assets Cash Accounts Receivable Inventory Total Current Assets Equipment, net Total Assets 37,760 65,380 20,000 =(100,000*70%*7%)+(120,000*70%*(65%+7%) 123,140 116,975 240,115 -119,075-2, 100 32,400 4,500 90,000 =72,000*45% =3,375+1,125 126,900 Liabilities Accounts Payable Interest Payable Notes Payable Total Liabilities Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 35,000 78,215 113,215 240,115