Question

12,000 15,100 Given the following information for Jawa Corp. prepare a full cas full cash budget for the months of April, May, and June Feb Mar Apr May lune July Sales in Units 10,000 16,250 16,675 16,000 with a per unit cost All units are sold at a price of $24.75, with a per unit cost of $13.50. Salesa 5.50 sales are collected as follows: 60% month of sale, 30% month after sale and remainder 2nd month after sale. Pure Purchases of materials, which account for 50% of the product cost (remainder of the product cost is Facto for 75% month of purchase and 25% month after purchase. Materials are purchase advance In addition, the following are paid monthly: Building Lease $21,750, Office salaries $10.50 Management Salaries $20,000, Trash removal $1,500, Utilities based on a rate of 20 cen h removal $1,500, Utilities based on a rate of 20 cents per Payroll taxes at the rate of 7.65% (paid on all wages), Equipment maintenance based on a rate of as cents per unit. The company will also be making the following payments: May Insurance payment for the months May-July $15,000, in April Income tax deposit of $30,000, the company will declare a quarterly dividend in May to be paid June 15 of $25,000, Employee first aid training at a cost of $2,500 is planned for July Depreciation is $21,265 per month based on straight line and income taxes are based on an average effective tax rate of 11.50%. At the start of April, the company had a cash balance of $35,450. Requirement #2 Based on the previous information prepare a traditional income statement (in proper format) for the month of June. Requirement #3 The company likes to maintain a cash balance of $30,000 at all times. They are considering purchasing new machinery at the beginning of July at a cost of $175,000. Do they have a sufficient amount of cash on hand to make this purchase or would they need to make arrangements for any financing? Requirement #4 Given that the company has the following dividend policy Dividends are paid quarterly based on the annual rate of $2.00 per share. How many shares of stock are currently outstanding?

Answer 1

Solution:

Requirement #1 Particulars Sales in Units (x) Sale price per unit Total Sales Cash Sales Cash Collected: After one Month After two month Jawa Corp. Cash Receipt Schedule For the Month April, May and June February March April May June 10,000 12,000 15,100 16,250 16,675 24.75 24.75 24.75 24.75 24.75 2,47,500 2,97,000 3,73,725 4,02,188 4,12,706 1,48,500 1,78,200 2,24,235 2,41,313 2,47,624 July 16,000 24.75 3,96,000 2,37,600 74,250 89,100 24,750 1,12,118 29,700 1,20,656 37,373 1,23,812 40,219 Total Cash Receipts (A) 3,38,085 3,83,130 4,05,653 July 16,000 13.50 2,16,000 27,000 Jawa Corp. Cash Disbursement Schedule For the Month April, May and June Particulars February March April May June No. of Units Sold 10,000 12,000 15,100 16,250 16,675 (x) Cost per Unit 13.50 13.50 13.50 13.50 13.50 Cost of Goods Sold 1,35,000 1,62,000 2,03,850 2,19,375 2 ,25,113 Total Purchases 81,000 1,01,925 1,09,688 1,12,556 1,08,000 Cash Purchases 60,750 76,444 82,266 84,417 81,000 Cash Payment: After One Month 20,250 25,481 27,422 28,139 Building Lease 21,750 21,750 21,750 Office Salaries 10,500 10,500 10,500 Management Salaries 20,000 20,000 20,000 Trash Removal 1,500 1,500 1,500 Utilities Expenses 3,020 3,250 3,335 Factory Worker Wages 1,01,925 1,09,688 1,12,556 Payroll Taxes 7,797 8,391 8,611 Equipment Maintenance 5,285 5,688 5,836 Insurance Payment 15,000 Income Tax 30,000 Dividend Payment 25,000 Total Cash Payments (B) 3,09,524 3,07,605 3,18,227

Jawa Corp. Schedule of Monthly Cash Budget for April, May and June Particulars April May June Total Cash Receipts 3,38,085 3,83,130 4,05,653 Total Cash Payments 3,09,524 3,07,605 3,18,227 Net Cash Flows 28,561 75,525 87,426 Beginning Cash Balance 35,450 64,011 1,39,536 Closing Cash Balance 64,011 1,39,536 2,26,962 Requirement #2 Traditional Income Statement for the month of June Particulars Amount $ Amount $ Sales 11,88,619 Less: Cost of Goods Sold 6,48,338 Gross Profit 5,40,281 Operating Expenses: Building Lease 65,250 Office Salaries 31,500 Management Salaries 60,000 Trash Removal 4,500 Utilities Expenses 9,605 Payroll Taxes 24,799 Equipment Maintenance 16,809 Insurance Payment (for May and June) 10,000 Depreciation Expense 63,795 2,86,258 Income Before Tax 2,54,024 Less: Income tax @11.5% 29,213 Income After Tax 2,24,811

Requirement #3 Jawa Corp has $ 226,962 cash end of June. If company adopt the policy to maintain $30,000 at the end then also company have $ 196,962 as surplus fund which is sufficient for the purchase of new machinery Requirement #4 Culculation of No. of shares Outstanding Dividend Declared for the quarter (+) Dividend per share No. of Shares Outstanding 25,000 $2.00 12,500