The following data relate to the operations of Picanuy Corporation, a wholesale

Question

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods: Current assets as of December 31 Cash $6,000 ...$32,550 . $100,000 .$30,135 a. b. The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales) Actual and budgeted sales data are as follows: : .. .$60,000 . ...$70,000 December (actual) April $55,000 Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. Each month's ending inventory should equal 20% of the following month's budgeted cost of i goods sold. One-quarter of a month's inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (exclud- ing depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is l $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. Equipment will be acquired for cash: $3,000 in January and $8,000 in February Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreemen in increments of $1,000 at the beginning of cach month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that inter- est is not compounded. The company would, as far as it is able, repay the loan plus accumu- j c. d. e. f. g. h. t with a local bank that allows the company to borrow lated interest at the end of the quarter. Using the data above 1. Complete the following schedule: Schedule of Expected Cash Collections January, February March Quarter 36,000 Credit sales. Total collections ..

Explanation / Answer

ans 1 Schedule of Expected Cash Collections January Feb March Quarter April Total sales T 70000 80000 85000 235000 55000 Cash Sales (40% for cash) S 28000 32000 34000 94000 Credit Sales (T-S) 36000 42000 48000 126000 Total Collections 64000 74000 82000 220000 ans 2 Merchandise Purchases Budget January Feb March Quarter April Budgeted Cost of Goods Sold (70%*sales) $49,000 $56,000 $59,500 $176,250 $41,250 Add Desired Ending Inventory (20%*next COGS $11,200 $11,900 $8,250.0 $8,250.0 Total Needs $60,200 $67,900 $67,750 $184,500 Less Beginning Inventory $9,800 $11,200 $11,900 $9,800 Required Purcahses $50,400 $56,700 $55,850 $174,700 ams 3 Schedule of Expected Cash Disbursements- Merchandise Purchases (1/4 in same month and 3/4 in next month) January Feb March Quarter Dec Purchases $32,550 $32,550 Jan Purchases $12,600 $37,800 $50,400 Feb Purchases $14,175 $42,525 $56,700 JMar Purchases $13,963 $13,963 Total Disbursements $45,150 $51,975 $56,488 $153,613 Selling & administrative budget January Feb March Quarter Comissiion 12000 12000 12000 36000 Rent 1800 1800 1800 5400 Other expenses (8%*sales) 5600 6400 6800 18800 Total cash expenses 19400 20200 20600 60200 Cash Budget January Feb March Quarter Beginnning Cash Balance 6,000 $5,450 $5,275 6,000 Add Cash Collections 64,000 74,000 82,000 220,000 Total Cash Avail 70,000 79,450 87,275 226,000 Less Cash Disbursements For Inventory $45,150 $51,975 $56,488 $153,613 For Operating Expenses 19400 20200 20600 60200 For Equipment 3000 8000 11000 Total Cash Disbursements $67,550 $80,175 $77,088 $224,813 Excess(Deficiency) of Cash $2,450 ($725) $10,188 $1,188 Financing: Borrowings: 3000 6000 9000 Repayments: -4978 -4978 Interest: -210 -210 Total Financing 3000 6000 -5188 3812 Ending Cash Balance $5,450 $5,275 $5,000 $5,000 Interet: (3000*3%)+(6000*2%) working Expenses Income statement sales 235000 Less;: Cost of Good sold $176,250 Gross profit $58,750 Less: S & A exp Commission 36000 Rent 5400 Depreciation 2400 Other expenses 18800 Total S & A exp 62600 Net operating income ($3,850) Interest exp 210 Net Income ($4,060)

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