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Can anyone do this?

Accounting until tonight

Can anyone do this?

Accounting until tonight

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Mount Dandenong Bikes Cont.
The cash flow wheel and cash budgetsi Sales Forecast* __—
__—
__—
__— Total Budgeted Revenue
*$80 million in revenues (50% is earned in the 4 quarter holiday season with sales fairly even for the other three quarters) V)-
00
P
O
O
p
O
O
0 Cash Receipts** _—
___—
Beg. Accounts receivable __—
1“ Quarter Sales ___
2"” Quarter Sales ___
3” Quarter Sales __—
4‘“ __— Quarter Sales
Total Receipts ** Customers pay on account and have 30-day terms. In general 2/3 of each quarter’s sales are received during the
quarter and the remaining 1/3 in the following quarter. 1/3 of fourth quarter revenues ($30 million) from previous year are
included in beginning accounts receivable. Bad debts are immaterial and no other cash receipts (i.e. from new long-term
borrowings). Why Is the total amount received from customers (total receipts) less than budgeted amount of revenues? Budgeted Purchases*** _—
_—
_—
_— *** Assume production and therefore material purchases matches the pattern of sales (50% fourth quarter and balance
evenly through the first three quarters). Direct Materials Purchase Disbursement**** _—
—— second
___—_—
___—_—
___—_—
___—_— ___—— ___—— 151:
n
4‘“ Quarter Sales
Total Disbursements **** Payments are made a month after purchase. As a result 2/3 of the purchases are paid during each quarter and 1/3
paid during the following quarter. Fourth quarter purchases for the prior year were expected to be $6mil|ion. Why is the
total amount paid less than the budgeted amount of direct material purchases? I Cash transactions (required to prepare cash budgets) include: 1. Cash receipts; 2. Cash disbursements; 3. Short—term
borrowings (line of credit to cover cash shortages; short-term investments for adequate cash for day-to-day operations)

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Summary of cash receipts and disbursements for Mount Dandenong Bikes***** ——_
— First Second
Cash Receipts Revenues _— — _ 1 010 000 8 000 000
Total Disbursements
Excess receipts (disbursements) - ***** The remaining variable costs are incurred in the same pattern as direct material purchases. In the fixed cost
category, property taxes (rates) are due in the 2"d and 4‘" quarters. Insurance payments are due in the 1“ and 3"d quarters.
The remaining FC are incurred uniformly across the four quarters. All costs (other than DM) are paid in the quarter they
are incurred. Management plan to spend $8M on new equipment during the second quarter. Why is depreciation
expense not included here? 8 000 000 Short-term financing budget for Mount Dandenong Bikes****** ——
——_—_ Beginning balance, cash and short-
term investments Excess receipts (disbursements) ————
Line of credit —-—_
——_—_ Interest on borrowings
Repayments Existing balance, cash and short- term investments
******Cash and short-term investments at the beginning of the period total $9mi|lion. Management wish to maintain a
minimum cash balance of $200 000. Cash deficiencies are financed with a 6% line of credit (quarterly interest payments
required). This means they need to borrow $1 336 742 in the 2"d quarter and an additional $3 360 951 in the 3rd quarter
(total $4 697 693) to maintain the minimum cash balance. They budget to repay this amount during 4‘" quarter when sales
increase. Total interest costs on the line of credit are estimated to be $90 516. Note: they budget for zero earnings on
short-term investments recorded.

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