Reference no: EM13897935
At December 31, the balance sheet of Rodriguez Malting Company was the following (in thousands):
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Cash
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$ 50
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Accounts payable
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$ 360
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Accounts receivable
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530
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Accrued expenses
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212
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Inventories
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545
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Bank loan
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400
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Current assets
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$1,125
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Current liabilities
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$ 972
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Net fixed assets
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1,836
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Long-term debt
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450
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Common stock
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100
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Retained earnings Total liabilities and
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1,439
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Total assets
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$2,961
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shareholders' equity
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$2,961
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The company has received a large order and anticipates the need to go to its bank to increase its borrowings. As a result, it needs to forecast its cash requirements for January, February, and March.
Typically, the company collects 20 percent of its sales in the month of sale, 70 percent in the subsequent month, and 10 percent in the second month after the sale. All sales are credit sales.
Purchases of raw materials to produce malt are made in the month prior to the sale and amount to 60 percent of sales in the subsequent month. Payments for these purchases occur in the month after the purchase. Labor costs, including overtime, are expected to be $150,000 in January, $200,000 in February, and $160,000 in March. Selling, administrative, tax, and other cash expenses are expected to be $100,000 per month for January through March. Actual sales in November and December and projected sales for January through April are as follows (in thousands):
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November $500
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February $1,000
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December 600
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March 650
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January 600
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April 750
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On the basis of this information:
a. Prepare a cash budget for the months of January, February, and March.
b. Determine the amount of additional bank borrowings necessary to maintain a cash balance of $50,000 at all times.
c. Prepare a projected Income Statement for the months of January, February and March
d. Prepare a forecast balance sheet for March 31.
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