On Jan 1, purchases will cease untile inventory reaches $6,000 after which time purchases will equal sales. Merchandise costs average $4 per kite. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within 30 days, but exp has shown that 60% of current sales are collect in the current month, 30% in the next month, and 10% in the month thereafter. Bad debts are negligible.
Monthly operating expenses are as follows:
Wages, and salaries $15,000
Insurance expired 125
Rent $250/month + 10% of quarterly sales over $10,000
Cash dividends of $1,500 are to be paid quarterly, beginning Jan 15, and are declared on the 15th of the previous month. All operating expenses are paid as incurrent except insurance, depreciation, and rent. Rent of $150 is paid at the beginning of each month, and the additional 10% of sales is paid quarterly on the tenth of the month following the end of the quarter, The next settlement is due Jan 10
The company plans to buy some new fixtures for $3,000 cash in March.
Money can be borrowed and repaid in multiples of $500 at an interest rate of 10% per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing occurs at the beginning, and repayments at the end of the months in question. Money is never borrowed at the beginning and repaid at the end of the sme month. Compute interest to the nearest dollar.
Assets as of Dec. 31, 2007 Liabilities as of Dec 31, 2007
Cash $ 5,000 Accounts payable(merchandise) $35,000
Accts rec. 12,500 Dividends payable 1,500
Inventory* 39,050 Rent payable 7,800
Unexpired insurance 1,500 ======
Fixed assets, net 12,500 $44,850
*Nov 30 inventory balance = $16,000
Recent and forecasted sales:
Oct. $38,000 Dec $25,000 Feb $70,000 Apr $45,000
Nov $25,000 Jan $62,000 Mar $38,000
1) Prepare a master budget including a budgeted income statement, balance sheet, statement of cash receipts and disbursements, and supporting schedules for the months Jan through Mar 2008
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