Near the end of 2011. the management of Simid Sports Co.. a merchandising compan

Question

Near the end of 2011. the management of Simid Sports Co.. a merchandising company, prepared the following estimated statement of financial position for December 31. 2011. To prepare a master budget for January. February, and March of 2012. management gathers the following information. Simid Sports' single product is purchased for S30 per unit and resold for S55 per unit. The expected inventory level of 5.500 units on December 31. 2011. is more than management s desired level for 2012. which is 20% of the next month's expected sales (in units) Expected sales are January. 6.750 units: February. 9.500 units; March. 10.750 units: and April. 10.500 units Cash sales and credit sales represent 20% and 80%. respectively, of total sales. Of the credit sales. 65% Is collected In the first month after the month of sale and 35% in the second month after the month of sale. For the December 31. 2011. accounts receivable balance. $130,000 is collected In January and the remaining S390.000 is collected in February. c Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31. 2011. accounts payable balance. $85,000 is paid in January and the remaining $260,000 is paid m February Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $54,000 per year. General and administrative salaries are $132,000 per year Maintenance expense equals $1,800 per month and is paid in cash. Equipment reported in the December 31. 2011. statement of financial position was purchased in January 2011 It is being depreciated over eight years under the straight-line method with no residual value The following amounts for new equipment purchases are planned m the coming quarter January. $34,000; February. $98,000: and March. $29,000 This equipment will be depreciated under the straight-line method over eight years with no residual value A full month's depreciation is taken for the month in which equipment is purchased. The company plans to acquire land at the end of March at a cost of $145,000. which will be paid with cash on the last day of the month. Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and Interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $15,560 in each month. The income tax rate for the company is 35%. Income tax on the first quarter's income will not be paid until April 15. Budgeted Income statement for the entire first quarter (not for each month) (Round your answers to the nearest dollar amount. Input all amounts as positive values. Omit the "$" sign in your response.)

Explanation / Answer

CASH BUDGET April May June Begning Cash Balance $36,000.00 $15,560.00 $204,410.00 Add: Receipt from Cusatomers $204,250.00 $687,550.00 $493,900.00 Total Cash Available $240,250.00 $703,110.00 $698,310.00 Less: Cash Disbursement: Mercandise Purchase $85,000.00 $278,900.00 $134,100.00 Selling and Administrative Exp $91,550.00 $121,800.00 $135,550.00 Land Purchase $145,000.00 Tax Payble $89,000.00 Equipment Purchase $34,000.00 $98,000.00 $29,000.00 Total Cash Disbursement $210,550.00 $498,700.00 $532,650.00 Excess/(Deficiet) Cash balance $29,700.00 $204,410.00 $165,660.00 FINANCING Interest -$140.00 Borrowing/Repayment -$14,000.00 Ending Cash Balance $15,560.00 $204,410.00 $165,660.00 Sales Budget Jan Feburary March April Sale Unit 6750 9500 10750 10500 Selling Price $55.00 $55.00 $55.00 $55.00 Expected Sales $371,250.00 $522,500.00 $591,250.00 $577,500.00 Cash Sales @ 20% $74,250.00 $104,500.00 $118,250.00 $115,500.00 Credit Sales 80% $297,000.00 $418,000.00 $473,000.00 $462,000.00 Statement Showing Cash Collection Jan. Feb. March Collected For Dec.2011 sale $130,000.00 $390,000.00 Collected For Jan. 2012 sale $193,050.00 $103,950.00 Collected For Feb. 2012 sale $271,700.00 Total Cash collected from credit sales $130,000.00 $583,050.00 $375,650.00 Cash Sales $74,250.00 $104,500.00 $118,250.00 Total Cash collected $204,250.00 $687,550.00 $493,900.00 Mercandise Purchase Budget Jan. Feb. March Units Sold 6750 9500 10750 Desired Ending Inventory 1900 2150 2100 Total Needs 8650 11650 12850 Less: Begning Inventory 5500 1900 2150 Required Purchase 3150 9750 10700 Purchase Value @30 per unit $94,500.00 $292,500.00 $321,000.00 Schedule of Expected Cash Disbursement Jan. Feb. March Paid for December Purchase $85,000.00 $260,000.00 January Purchase $18,900.00 $75,600.00 February Purchase $58,500.00 March Purchase $0.00 Total Payment $85,000.00 $278,900.00 $134,100.00 Cash Disbursement- Selling & Admin. Overhead Jan. Feb. March Sales Commission $74,250.00 $104,500.00 $118,250.00 Sales Salary $4,500.00 $4,500.00 $4,500.00 Admin. Salary $11,000.00 $11,000.00 $11,000.00 Repairs $1,800.00 $1,800.00 $1,800.00 Total Payment $91,550.00 $121,800.00 $135,550.00 Assumed that salary has been paid monthly INCOME STATEMENT FOR QUARTER JUNE 2012 Sales $1,485,000.00 Cost of Goods Sold $810,000.00 Gross Profit $675,000.00 Operating Expense: Sales Commission $297,000.00 Sales Salary $13,500.00 Admin. Salary $33,000.00 Repairs $5,400.00 Depreciation $20,218.75 Interest $140.00 Profit before tax $305,741.25 Less: Tax $107,009.44 Profit After tax $198,731.81 BALANCE SHEET AS AT 30 JUNE 2012 Cash $165,660.00 Account receivable $619,300.00 Inventory $63,000.00 Equipment $699,000.00 Acc. Dep. $87,468.75 $611,531.25 Land $145,000.00 Total Assets $1,604,491.25 Account Payble $555,000.00 Tax payble $107,009.44 Share Capital $472,500.00 Ret. Earning $469,981.81 Total Equity & Liab. $1,604,491.25

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