2024 – see attached and below HMWK 9 45 We really need to get this new material handling equipment in operation just after
For accountsquru $30.00 – 2024
see attached and below;
HMWK 9-45
“We really need to get this new material-handling equipment in operation just after the new-year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a short-term loan down at MetroBank.” This statement by Beth Davies-Lowry, president of Intercoastal is a small, Company, concluded a meeting she had called with the firm’s top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronics products. The firm’s main product lines are small kitchen appliances and power tools. Marcia Wilcox, Intercoastal’s General Manager of Marketing, has recently completed a sales forcast. She believes the company’s sales during the first quarter of 20×1 will increase by 10 percent each month over the previous month’s sales. Then Wilcox expects sales to remain constant for several months. Intercoastal’s projected balance sheet as of December 31, 20×0, is as follows:
CASH $35,000
ACCOUNTS RECEIVABLE 270,000
MARKETABLE SECURITIES 15,000
INVENTORY 154,000
BLDG’S AND EQUIPMENT 626,000
TOTAL ASSETS $1,100,000
ACCOUNTS PAYABLE $176,000
BOND INTEREST PAYABLE 12,500
PROPERTY TAX PAYABLE 3,600
BONDS PAYABLE (10% due 20×6) 300,000
COMMON STOCK 500,000
RETAINED EARNINGS 107,500
TOTAL LIABILITIES/STOCKHOLDERS EQUITY $1,100,000
Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20×1. In the process, the following information has been accumulated:
1. Projected sales for December of 20×0 are $400,000. Credit sales typically are 75 percent of the total sales. Intercoastal’s credit experience indicates that 10% of the credit sales are collected during the month of sale, and the remainder collected during the following month.
2. Intercoastal’s cost of goods sold generally runs at 70% of sales. Inventory is purchased on account and 40% of each month’s purchases are paid during the month of purchase. The remainder is paid during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to have inventory at the end of each month equal to half of the next month’s projected cost of goods sold.
3. Hanson has estimated the Intercoastal’s other monthly expenses will be as follows:
SALES SALARIES $21,000
ADVERTISING/PROMOTOIONS 16,000
ADMINISTRATIVE SALARIES 21,000
DEPRECIATION 25,000
INTEREST ON BONDS 2,500
PROPERTY TAXES 900
In addition, sales commission runs at 1% of sales.
4. Intercoastal’s president, Davies-Lowry, has indicated that the firm should invest $125,000 in an automated inventory-handling system to control the movement of inventory in the firms warehouse just after the new year begins. These equipment purchases will be financed primarily from the firm’s cash and marketable securities. However, Davies-Lawry believes that Intercoastal needs to keep a minimum cash balance of $25,000. If necessary, the remainder of the equipment purchases will be financed using short term credit from a local bank. The minimum period for such a loan is 3 months. Hanson believes short term interest rates will be 10% per year at the time of the equipment purchases. If a loan is necessary, Davies-Lowry has decided it should be paid off by the end of the first quarter if possible.
5. Intercoastal’s board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter.
6. The interest on any short term borrowing will be paid when the loan is repaid. Interest on Intercoastals bonds is paid semiannually on January 31, and July 31 for the preceding 6 month period.
7. Property taxes are paid semiannully on February 28 and August 31 for the preceding 6 month period.
Prepare Intercoastal Electronic Company’s master budget for the first quarter of 20×1 by completing the following schedules and statements.
1. SALES BUDGET:
20×0 20×1 December January February March 1st Qtr
Total Sales
Cash Sales
Sales on account
2. Cash Receipts Budget:
20×1
January February March 1st Qtr
Cash Sales
Cash Collections from Credit sales (current Month)
Cash Collections from Credit Sales (preceding month)
Total cash receipts
3. Purchasee Budget:
20×0 20×1
January January February March 1st Qtr
Budgeted Cost of Goods Sold
Add: Desired ending inventory
Total goods needed
Less: Expected beginning Inventory
Purchases
4. Cash Disbursment Budget:
20×1
January February March 1st Qtr
Inventory purchases:
Cash payments for purchases(current month)
(preceding month)
Total cash payments for inventory purchase
Other expenses:
Sales Salaries
Advertising and promotion
Administrative salaries
Interest on bonds
Property Taxes
Sales Commissions
Total cash payments for other expenses
Total cash disbursements
5. Complete the 1st three lines of the summary cash budget. Then do the analysis of short term financing needs in requirement (6). Then finish requirement (5).
Summar Cash Budget:
20×1
January February March 1st Qtr
Cash receipts (from schedule 2)
Less: Cash Disbursements(from schedule 4)
Change in cash balance during period due to operations
Sale of marketable securities(1/2/x1)
Poceeds from bank loan(1/2/x1)
Purchase of equipment
Repayment of bank loan(3/31/x1)
Interest on bank loan
Payment on dividends
Change in cash balance during
1st quarter
Cash balance(1/1/x1)
Cash balance(3/31/x1)
6. Analysis of short term financing needs:
Projected cash balances as of December 31, 20×0 $
Less: Minimum cash balance _________
Cash available for equipment purchases $
Projected proceeds from sale of marketing securities _________
Cash available $
Less: Cost of investment in equipment _________
Required short term borrowing $
7. Prepare Intercoastal’s Electronics budgeted statement for the 1st quarter of 20×1. (ignore income taxes)
8. Prepare Intercoastal’s Electronics budgeted statement of retained earnings for the 1st quarter of 20×1.
9. Prepare Intercoastal’s Electronics budgeted balance sheet as of March 31, 20×1. (Hint; On March 31, 20×1, Bond Interest Payable is $5,000 and Property Taxes Payable is $900.)
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