Exercise 4) Carly\'s Critters Company operates a gift shop at the local zoo. The
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Question
Exercise 4) Carly's Critters Company operates a gift shop at the local zoo. The results of for the first quarter of 2018 are as follows: Cost of Goods Sold Gross Margin Selling & Administrative Expenses (S12.750 Operating Income Income Taxes Net Income $125,000 $56,250 $43,500 Additional Information: 1. Asset accounts are cash, accounts receivable, inventory, and equipment (net). Accounts payable is the only liability account. Owner's equity accounts are common stock and retained earnings. 2. Fifty-five percent of inventory purchases are paid in the quarter of purchase and 45 percent are paid in the following quarter. All other expenses, including taxes, are paid in the quarter incurred 3· The cash balance at the end of quarter one is $8.888. 4. Sales and cost of goods sold are expected to decrease by 12 percent in each of the next three quarters of the year inistrative expenses are expected to increase by $4,675 due to increases in advertising and salaries. All other expenses in this category are expected to remain constant. 6· The balance in accounts receivable at the end of quarter one relates to sales made during the first quarter of 2018. 7. Dividends of $905 are paid out during each quarter. 8. Inventory purchases in the first quarter of 2018 are $44,440. 9· The balance in accounts payable at the end of quarter one relates to purchases made during the first quarter of 2018. 10. Selling & Administrative expense includes $985 of quarterly depreciation related to equipment The equipment had a book value of S17.825 at the end of quarter one. 11. Inventory at the end of the first quarter is $64,670. The company plans on holding ending inventory equal to 75 percent of subsequent quarter cost of goods. 12. Sixty-five percent of sales are collected in the quarter of sale and 35 percent are collected in the quarter following the sale 13. Common stock at the end of quarter one is $80,568 and retained earnings is $34,567 14. The tax rate is expected to remain at 32 percent. Required A. Prepare a budgeted income statement for the second quarter of 2018. B. Prepare a cash receipts & disbursements budget for the second quarter of 2018. C. Prepare a budgeted balance sheet as of the end of the second quarter of 2018. D. The company is discussing the possibility of opening a new store at a new zoo right at the beginning of the third quarter. This store would require cash payments of $15,000. Assuming the company new store be opened without obtaining additional funds? How much will they have to borrow or have left over? y wants a minimum cash balance of $40,000 at the beginning of the third quarter, can aExplanation / Answer
A. Carly's Critters Company
Budgeted Income Statement
For the Second Quarter 2018
B. Carly's Critters Company
Cash Budget
Second Quarter 2018
Schedule of Expected Cash Collections : Second Quarter 2018
C. Carly's Critters Company
Budgeted Balance Sheet
End of Second Quarter 2018
D. The company has a cash balance of $ 56,863 at the beginning of the third quarter of 2018. There should be $ 1,863 left over after taking care of the required investment of $ 15,000 in the new store, and the minimum cash balance requirements of $ 40,000. Therefore, there would be no need for the company to resort to borrowings.
$ Sales 110,000 Cost of Goods Sold 60,500 Gross Margin 49,500 Selling and Administrative Expenses 17,425 Operating Income 32,075 Income Taxes 10,264 Net Income 21,811Related Questions
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