The total line of credit is 6000 it will borrow the money

Assignment Help Accounting Basics

Reference no: EM13570584

Quantum Graphics makes custom T-shirts and other promotional products for student organizations and businesses. It plans to open a new location in Austin, Texas. It has secured a corporate contract with Dell Computer Corporation that will generate $15,500 per month in sales. With the new contract and potential student organizations from colleges in San Marcos to Georgetown, it needs to plan for its first quarter of operations.

Quantum Graphics expects cash sales from student organizations to be $5,750, $4,500, and $3,000 for Month 1, Month 2, and Month 3, respectively. Its corporate sales are always made on account.

Based on previous history, Quantum Graphics expects to collect 100% of its corporate sales in the following month of the original sale (e.g. Month 1 account sales are collected in Month 2, Month 2 account sales are collected in Month 3, etc.).

Quantum Graphics' cost of goods sold is projected to be 60% of all sales. Its selling, general and administrative expenses are 16% of all sales (Donations 10% + Advertising 5% + Miscellaneous 1% = 16%). It does not keep any inventory on hand and pays its accounts payable balances in full in the following month of purchase. Quantum Graphics' owner invested $1,500 in this venture. The $1,800 will be used to prepay the first three months of rent. Quantum Graphics signed a three month lease because it is in negotiations to purchase a rundown building for $3,000 located just south of Austin.

It believes it will be able to buy the building at the asking price and will need to make a cash payment in Month 3 for the building.

If Quantum Graphics is short of cash, it has access to a line of credit with an interest rate of 10%.

The total line of credit is $6,000. It will borrow the money at the beginning of the month to avoid a cash shortage. Quantum Graphics will only repay the loan when it has enough cash to pay the full balance and maintain an adequate ending cash balance. All loans that are repaid are repaid on the last day of the month. Quantum Graphics must always maintain an ending cash balance of at least $400.

An owner's draw of $2,800 every month. (Note: sole proprietors and partnerships take owner's draws, stockholders receive dividends).

Based upon the information provided, complete the master budget and answer the questions in Connect When making calculations always round up (i e 33 × 7% = 2 31 round Connect. i.e. 2.31, up to 3.00). You may also assume that there are 30 days in each month of the first quarter.

To what can we attribute the difference between projected total cost of goods sold and projected cash payments for inventory in the first quarter of operations?

	Quantum Graphics sells all its inventory in the month of purchase and purchases its inventory on account.
	Customers do not pay for the goods it purchases until 30 days after the date of purchase.
	Due to the Matching Concept, cash sales require payments for inventory in the month they occur.
	There is no difference between the cost of goods sold and cash payments.

Reference no: EM13570584

Questions Cloud

Madrid co has a direct labor standard of 4 hours per unit : madrid co. has a direct labor standard of 4 hours per unit of output. each employee has a standard wage rate of 11.50

The manufacturing overhead budget at latronica corporation : the manufacturing overhead budget at latronica corporation is based on budgeted direct labor-hours. the direct labor

If a 100 par value preferred stock pays an annual dividend : if a 100 par value preferred stock pays an annual dividend of 5 and comparable yields are 10 percent the price of this

With credit terms of 210 n30 the seller is offering the : with credit terms of 210 n30 the seller is offering the purchaser a 2 cash discount if the amount is paid within 10

The total line of credit is 6000 it will borrow the money : quantum graphics makes custom t-shirts and other promotional products for student organizations and businesses. it

Shorter-term cash budgets in general are used primarily for : which of the following statements is most correct?a.the typical actual cash budget will reflect interest on loans and

Briefly describe a situation that occurred in the media : briefly describe a situation that occurred in the media recently. how did the situation get resolved? was the

If a preferred stock pays an annual 450 dividend what : if a preferred stock pays an annual 4.50 dividend what should be the price of the stock if comparable yields are 10

The valuation of any financial asset is related to future : the valuation of any financial asset is related to future cash flows. why? how? how is the time value of money related

User Account

All Pages