GrowMaster Products, a rapidly growing distributor of home gardening equipment,
ID: 2475130 • Letter: G
Question
GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm’s marketing director, has completed the following sales forecast.
Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information.
GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12 percent line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $55,400.
repare the cash payments budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.)
Cash Payments Budget
April
May
June
March purchases
$
$
$
April purchases
May purchases
June purchases
$
$
$
Accounts Payable balance at the end of second quarter of 2012
$
Month Sales Month Sales January $908,300 July $1,508,600 February $1,005,000 August $1,508,600 March $908,300 September $1,609,200 April $1,158,100 October $1,609,200 May $1,256,000 November $1,508,600 June $1,403,400 December $1,702,100Explanation / Answer
Purchases budget:
Accounts Payable Balance at the end of second quarter is 25% of the month following purchase and in the current month 75% is paid. Therefore, 25% of June month purchases is outstanding =25% of ($590,816) =$147,704.
Particulars March April May June Sales(A) $908,300.00 $1,158,100.00 $1,256,000.00 $1,403,400.00 Cost of goods sold(40%) (B) $363,320.00 $463,240.00 $502,400.00 $561,360.00 70% purchased in the prior month (C )=70% of next month B $324,268.00 $351,680.00 $392,952.00 $422,408.00 30% in the month of COGS (D)=30%of (B) $108,996.00 $138,972.00 $150,720.00 $168,408.00 Purchases (E )= (C )+(D) $433,264.00 $490,652.00 $543,672.00 $590,816.00Related Questions
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