Jones Inc. operates a lawn care service where peak sales occur in the month of J
ID: 2488570 • Letter: J
Question
Jones Inc. operates a lawn care service where peak sales occur in the month of June. Data regarding the store's operations follow:
Sales are budgeted at $300,000 for April, 400,000 for May, and $650,000 for June and $525,000 in July
Collections are expected to be 30% in the month of sale, 65% in the month following the sale, 3% in the second month following sale and 2% uncollectible.
The cost of goods sold is 70% of sales.
The company desires ending merchandise inventory to equal 20% of the following month's cost of goods sold. Payment for merchandise is made 50% in the month of purchase and 50% in the month following the purchase.
Miscellaneous monthly expenses to be paid in cash are $12,000.
Monthly depreciation is $15,000.
Equipment purchases of $40,000 in April and $55,000 in May were paid in cash.
Dividends of $40,000 were declared and paid in June.
Any borrowings must be in $1,000 increments at 12% annual interest. Assume interest accrues at the beginning of the month and is paid at the end of the month. The company must maintain a minimum cash balance of $20,000.
Ignore income taxes.
All accounts receivable from March will be collected in April and all accounts payable in March will be paid in April.
The balance sheet as of March 31st:
Jones, Inc.
Balance Sheet
3/31/14
Assets:
Cash
$35,000
Net Accounts Receivable
$72,000
Merchandise Inventory
$41,000
Property Plant and Equipment
$1,400,000
Less: accumulated depreciation
$438,000
$962,000
Total Assets
$1,110,000
Liabilities & Stockholder's Equity
Accounts Payable
$200,000
Common Stock
$350,000
Retained Earnings
$560,000
Total liabilities and stockholder's equity
$1,110,000
Prepare the following budgets for each month April, May, June and Total for the quarter in good form in excel with proper use of formulas and formatting:
c. Prepare a Cash Budget
How much does the company need to borrow for the quarter?
How much can the company repay for the quarter?
d. Prepare a Budgeted Income Statement
Jones, Inc.
Balance Sheet
3/31/14
Assets:
Cash
$35,000
Net Accounts Receivable
$72,000
Merchandise Inventory
$41,000
Property Plant and Equipment
$1,400,000
Less: accumulated depreciation
$438,000
$962,000
Total Assets
$1,110,000
Liabilities & Stockholder's Equity
Accounts Payable
$200,000
Common Stock
$350,000
Retained Earnings
$560,000
Total liabilities and stockholder's equity
$1,110,000
Explanation / Answer
working
CASH BUDGET FOR THE 3 MONTHS ENDING June 31 April May June Qtr Cash balance 35000 20500 20500 35000 Add collections from customers 162000 315000 464000 941000 Total cash available 197000 335500 484500 976000 Less disbursements For Inventory 312500 270000 376250 958750 For Misselleneous monthly expenses 12000 12000 12000 36000 Equipment Purchase 40000 55000 95000 For cash dividend 40000 40000 Total disbursements 364500 337000 428250 1129750 Excess (deficiency) of receipts -167500 -1500 56250 -153750 over disbursements Less: Minimum Cash Balance (for understanding) 20000 20000 20000 20000 Total cash balance( needed)/Excess (for understanding) -187500 -21500 36250 -173750 Financing: Borrowings 188000 22000 210000 Repayments -30000 -30000 Interest -6080 -6080 Total financing 188000 22000 -36080 173920 Cash balance, ending (withminimum balance) 20500 20500 20170 20170 Income statement April May June Total Sales 300000 400000 650000 1350000 Less: cost Of good sold 210000 280000 455000 945000 Gross Profit 90000 120000 195000 405000 Less: Miscelleneous Monthly expenses 12000 12000 12000 36000 Less: deprecitaion 15000 15000 15000 45000 Less: Interest Expenses 1880 2100 2100 6080 Net income 61120 90900 165900 317920Related Questions
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