CASE STUDY Bale Electric Company is a small, rapidly growing wholesaler of scien

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CASE STUDY Bale Electric Company is a small, rapidly growing wholesaler of scientific calculators. Carlo Ancellotti, Bale’s general manager of marketing, predicts sales of 100,000 units in January 2016, increasing by 10% each month during 2016. Sales revenue in January 2016 is forecast to be $800,000. The sales price will remain constant in 2016. Bale’s projected balance sheet as at 31 December 2015 is provided as follows: Cash $ 50,000 Accounts receivable 472,500 Inventory 280,000 Buildings and equipment (net of accumulated depreciation) 307,500 Total assets $1,110,000 Accounts payable 315,000 Interest payable 12,500 Long-term borrowings (10%, due in 6 years time) 300,000 Share capital 361,400 Retained earnings 121,100 Total liabilities and shareholders’ equity $1,110,000 Cristiano Ronaldo (the assistant accountant) is now preparing a monthly budget for the first quarter of 2016, and he needs your help. So far, the following information has been accumulated: · Projected sales for December 2015 are $700,000. Credit sales typically are 75 per cent of total sales, with the remainder being cash sales. Bale’s credit experience indicates that 10 per cent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. · Bale’s cost of goods sold generally runs at 70 per cent of sales. Inventory is purchased on credit, and 40 per cent 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 one-half of the next month’s projected cost of goods sold. Ronaldo has already prepared the purchases budget for the quarter to save you some work: Purchase budget $ Jan Feb mar COGS 560,000 616,000 677,600 Less OP Inv 280,000 308,000 33800 Plus CI Inv 308,000 338,800 372680 =purchases 588,000 646,800 711480 · Sales salaries $21,000 · Advertising and promotion $16,000 · Administrative salaries $21,000 Other expenses are listed below: · Depreciation $25,000 · Interest on long-term borrowings $2,500 Ronaldo has estimated that Bale’s monthly cash expenses will be as follows: In addition, sales commissions run at the rate of 1 per cent of sales revenue. On January 1, a one-off payment of $175,000 is required to purchase new equipment. No depreciation is required to be calculated for this new equipment. Moyes believes that Bale needs to keep a minimum cash balance of $25,000. A short-term credit facility for $100,000 has been arranged with a local bank. The bank has given Bale an introductory offer of 0% interest for the first three months of 2016, although interest of 12% per annum will be charged for amounts borrowed after 31 March 2016. Moyes has decided that Bale should re-pay any short term loan required as soon as possible. Interest on Bale’s long-term borrowings is paid semi-annually, on 31 January and 31 July, for the preceding six-month period. REQUIRED: You are required to prepare Bale’s budget for the first quarter of 2016 by completing the following schedules and statements using an Excel spreadsheet: 1. Sales budget in units and revenue (1 mark) 2. Cash receipts budget (3 marks) 3. Cash payments budget (4 marks) 4. Summary cash budget (4 marks) 5. Prepare Bale Electric’s budgeted Income Statement for the first quarter using a standard absorption costing approach (Ignore income taxes) (4 marks) 6. Prepare Bale Electric’s budgeted Balance Sheet as at 31 March (Hint: On 31 March 2016, interest payable on long-term borrowings is $5,000) (4 marks) 4 marks are allocated for presentation and use of formulas in excel – please automate the spreadsheet so it can easily be used for scenario planning or ‘what-if’ analysis (simulation). For questions 7 – 9 combined, the number of words should NOT exceed 1,000 in total. 7. Explain the main purposes of budgeting within an organisation (5 marks) 8. Explain why it is important to prepare a cash budget in particular and what the problems are with having too little and too much cash (5 marks) 9. Advise Bale’s senior management team how they can manage their cash position more effectively to minimise the problems identified in question 8 above (5 marks) 4 marks are allocated for presentation, grammar, spelling and appropriate Harvard referencing where needed. 2 marks are allocated for appropriate teamwork as evidenced by your minutes and any other observations made by your lecture.

CAN YOU HELP ME WITH QUESTION NUMBER 6? HOW TO DO BALANCE SHEET FOR FIRST QUATER? THANK YOU

Explanation / Answer

certainly i will help,

1st prepare the opening balance sheet as on dec 2015, ( rough draft)

2nd you have to prepare budgets for the quater, 1.sales, 2.Accounts receivables 3.purchases 4. Accounts payable

5.cash , 6. calculate depreciation for the quater, 7. most of the budgeted information is provided in the question by Ronaldo, and some other information for the preparation of budgets, income statement and balance sheet.

you have to be care for the changes affecting in the quater like depreciation, cash balance, interest, Receivanles, payables, expenses,

as sales and purchases and cost of the goods was provided with calculate income statement along with the expenses and sales commission.

sales will be 110000 for feb 110000,

purchases provided in the question.

hope now you can prepare balance sheet now , i could have prepared , but the question required to be solved in excel with formula. requires more time than time allotted, I copied the question, i be solving it , if any doubt , you can come back.

To the extent time allowed, i be providing you some solved problem.

note: salaries expenses can be deemed to quaterly expense or monthly as more information required.

you can prepare income statement and cash statement, as my alloted is running out, you can come , i hope you prepare .

     balance sheet for dec 2015 share holders equity and liabilities Assets equity 361400 cash 50000 retained earnings 121100 accounts receivables 472500 long term borrowings 300000 inventory 280000 accounts payable 315000 buildings and equipment 307500 interest payable 12500 0 1110000 1110000

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