Prepare the cash budget for the second quarter

Reference no: EM13137645

Go Blue products, a rapidly growing distribution of home gardening equipment, is formulating its plans for 2013. Daniel Goldschlager, the firms marketing director, has completed the following sales forecast.

Month Sales
January 900,000
February 1,000,000
March 900,000
April 1,150,000
May 1,250,000
June 1,400,000

Month Sales
July 1,500,000
August 1,500,000
September 1,600,000
October 1,600,000
November 1,500,000
December 1,700,000

Angela Blue, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. She has gathered the following information.

- All sales are made on credit.

- Go Blue's excellent record in account receivable is expected to continue, with 60 percent of the billings collected in the month of the sales and the remaining 40 percent collected two months after the sales.

- Cost of goods sold, which is Go Blue's largest expense, is estimated to equal 40 percent of sales dollars. Seventy percent of inventory is purchased one month prior to the sales and 30 percent during the month of the sales. For example, in April, 30 percent of April cost of goods sold is purchased and 70 percent of May cost of goods is purchased.

- All purchases are made on account. Historically, 75 percent of accounts payable have been paid during the month of purchase and the remaining 25 percent in the month following purchase.

- Hourly wages and fringe benefits, estimated to be 30 percent of the current month's sales, are paid in the month incurred.

- General and administrative expenses are projected to be 1,550,000 for the year. A breakdown of the expense follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter.

Salaries and fringe benefits 324,000
Advertising 372,000
Property Taxes 136,000
Insurance 192,000
Utilities 180,000
Depreciation 346,000
Total 1,550,000

Operating income for the first quarter of 2012 is projected to be 320,000. Go Blue is subject to a 40 percent tax rate. The company pays 100 percent of its estimated taxes in the month following the end of each quarter.

Go Blue maintains a minimum cash balance of 50,000. If the cash is less than 50,000 at the end of the month, the company borrows against its 12 percent line of credit in order to maintain its balance. All borrowings are made at the beginning of the month and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principle repayment. The projected cash balance on April 1, 2013 is $50,000.

Required:
Prepare the cash budget for the second quarter (April, May and June).

Reference no: EM13137645

Questions Cloud

5 organizational recommendations for whites/european : Name 5 organizational recommendations for Whites/European Americans and American Indians/Alaska Natives and Multiracial groups?

Information about definition of terrorism : How do we define terrorism and why is such a definition important to Homeland Security? Discuss why there is confusion when trying to define terrorism.

Explain the distortion energy failure theory : How do I find the factor of safety using the distortion energy failure theory?

Sampling distribution of sample mean if sample of size given : standard deviation= 2.5 ounces. Which of the following is true about the sampling distribution of the sample mean if a sample of size 15 is selected?

Prepare the cash budget for the second quarter : Go Blue's excellent record in account receivable is expected to continue, with 60 percent of the billings collected in the month of the sales and the remaining 40 percent collected two months after the sales.

Statements regarding inventory transfers : Which of the following statements is true regarding inventory transfers between a parent and its subsidiary, using the initial value method?

Prepare a report showing the clinic activity variances : Prepare a report showing the clinic's activity variances for June. Indicate in each case whether the variance is favorable (F) or unfavorable (U).

Find number of left handers in the sample : The proportion of left handers is 0.10. What is the number of left handers in the sample and what notation is given to that number?

Show hat is the bayes estimator : Now assume that θ2 > 0 (with probability 1), and let δ1 hat be the Bayes estimator of 1/θ2 under the setup above. Show that δ1δ2 hat is the bayes estimator of θ1/θ2 , given x = (X1, X2).

User Account

All Pages