Reference no: EM133064547
Question - Maple Leaf Supply Company buys and sells a product line with an average selling price of $20 per unit. All sales are on credit, with a 2 percent discount available to customers who pay their accounts by the end of the month of purchase. On average, 80 percent of the customers pay within the discount period, 4 percent never pay their account, and the others pay during the month following the sale. The accountant recognizes the estimated bad debts at the end of each month.
Purchases of the product occur evenly throughout the month at an average price of $9 per unit. The targeted ending inventory is 200 units. All purchases are on account, due within 10 days after the purchase, with no discounts. As a result, two-thirds of the purchases are paid during the month in which the purchase occurred and one-third during the following month.
Other information:
1. Rent and utilities of $1,200 are paid on the 20th of each month, and employee salaries of $6,700 are paid on the 28th of each month.
2. Office supplies are purchased in January, April, July, and October for use in each quarter. The quarterly outlays have been $4,200.
3. Office equipment, with an expected five-year life was purchased at the beginning of 2024. Its net book value is currently $9,350. The company uses straight-line amortization.
4. Monthly sales in units were as follows:
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Estimated
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Actual
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December 2025
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1,300
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1,400
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January 2026
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1,600
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1,400
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February 2026
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1,200
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1,200
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March 2006
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850
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-
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April 2026
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900
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-
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The cash balance on March 1, 2026, is $2,350. The company has a good credit rating, and it can borrow to cover short-term cash needs.
Required -
1. Prepare a schedule of budgeted cash receipts and disbursements for March 2026. Will the company need a loan if the company wants to have a minimum cash on hand of 25 000 at the end of March. Assume interest on the loan, if needed is only paid in April?
2. Prepare a budgeted income statement for March 2026.
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