PLEASE HELP! I HAVE NO IDEA WHAT IM DOING! prepare a cash budget for the firm fo
ID: 2569896 • Letter: P
Question
PLEASE HELP! I HAVE NO IDEA WHAT IM DOING!
prepare a cash budget for the firm for its first twelve months operation.
Management 475: Cash Budgeting Exercise Nilpoj Furniture Co. Janice Nilpoj plans to open a home furnishings store with the assistance of her rich uncle, who will provide all of the cash needed to open the store. They will share 100% ownership of the business. Ms. Nilpoj estimated her sales revenues for the first three years of operation, as shown below Year Month Sales Revenue 1 1 $40,000 20,000 24,000 28,000 32,000 36,000 40,000 44,000 48,000 52,000 56,000 10 12 S/T $480,000 $640,000 $800,000 Her research into this industry enabled her to assume that her cost of goods sold will be 60% of sales revenue. (For example, this means that the cost to Nilpoj of the furniture sold in month 1 is $24,000.] Having forecast sales and costs of goods sold, Ms. Nilpoj next estimated the cost of fixed and current assets that she will need to support these sales: Construct a one-story, free-standing building with 5,000 ft2 of floor space to display and store furniture and put in an asphalt parking lot. Cost: $332k at month O · Keep a base inventory of furniture that is equal to twice the average monthly forecast of sales revenue for year 1; in addition, buy enough inventory monthly to cover the following month's sales forecast. She plans to pay for all inventory in the month that it is purchased. Cost: $72k at month 0 Calculation: ((($480k/12mos)"60%).2mos.) + ($40k"60%) . Finance customers who buy on credit. The entrepreneur is assuming that all sales will be credit sales, with customers taking one month to pay on the average. This is the industry's average collection period. . Purchase fixtures, office equipment, and a delivery truck. Cost: $52k at month 0 Pay for other expenses/fees totalling $24k at month O. (lawyer's fee for incorporation: $Ak; accountant's fee to set up record keeping system: $2k; buy 3 year prepaid insurance policy: $12k; buy necessary licenses: $2k; promote grand opening: $4k) .Explanation / Answer
1) Income statement for First month
Income Statement - First Month
Revenues
1st Month Expected revenue
40,000.00
Total Revenue
40,000.00
Expenses and Loses
Cost of goods sold
24,000.00
Ms Nilpoj's salary
4,800.00
Part time employee salary
2,400.00
Advertising
1,200.00
Utility expense
800.00
Delivery
800.00
Professional services
800.00
Supplies expense
400.00
Miscellaneous
1,600.00
Lawyer fees for incorporation
4,000.00
Accountant fees to Set up book keeping
2,000.00
Insurance - (12000*1/36 months)
333.33
License fees
2,000.00
Business promotion expenses
4,000.00
Depreciation expense
1,700.00
Total Expenses and Loses
50,833.33
Expected Net (loss) for First Month
-10,833.33
Income statement for Second month
Income Statement - Second Month
Revenues
2nd Month Expected revenue
20,000.00
Total Revenue
20,000.00
Expenses and Loses
Cost of goods sold
12,000.00
Ms Nilpoj's salary
4,800.00
Part time employee salary
2,400.00
Advertising
1,200.00
Utility expense
800.00
Delivery
800.00
Professional services
800.00
Supplies expense
400.00
Miscellaneous
1,600.00
Insurance - (12000*1/36 months)
333.33
Depreciation expense
1,700.00
Total Expenses and Loses
26,833.33
Expected Net (loss) for Second Month
-6,833.33
Income statement for First Year
Income Statement - First Year
Revenues
1st year Expected revenue
4,80,000.00
Total Revenue
4,80,000.00
Expenses and Loses
Cost of goods sold
2,88,000.00
Ms Nilpoj's salary
57,600.00
Part time employee salary
28,800.00
Advertising
14,400.00
Utility expense
9,600.00
Delivery
9,600.00
Professional services
9,600.00
Supplies expense
4,800.00
Miscellaneous
19,200.00
Lawyer fees for incorporation
4,000.00
Accountant fees to Set up book keeping
2,000.00
Insurance - (12000*12/36 months)
4,000.00
License fees
2,000.00
Business promotion expenses
4,000.00
Depreciation expense
20,400.00
Total Expenses and Loses
4,78,000.00
Expected Net Income for First year
2,000.00
Depreciation calculation:
a) Building - $300,000 - 25 years (300 months) = $300,000/300 = $1,000.00 per month
b) Parking lot - $32,000 - 10 years (120 months) = $32.000/120 = $266.67 per month
c) Equipment - $52,000 - 10 years (120 months) = $52,000/120 = $433.33 per month
Total Depreciation expenses per month = $1,700.00 per month
Please Note: 1) In case one question with multiple subparts, only first 4 subparts needs be answered as a mandatory requirement and
2) In case of multiple questions only first question (full) with minimum 4 sub parts (in case of more sub parts) needs to be answered as a mandatory requirement.
I have answered first question with all the subparts.
Income Statement - First Month
Revenues
1st Month Expected revenue
40,000.00
Total Revenue
40,000.00
Expenses and Loses
Cost of goods sold
24,000.00
Ms Nilpoj's salary
4,800.00
Part time employee salary
2,400.00
Advertising
1,200.00
Utility expense
800.00
Delivery
800.00
Professional services
800.00
Supplies expense
400.00
Miscellaneous
1,600.00
Lawyer fees for incorporation
4,000.00
Accountant fees to Set up book keeping
2,000.00
Insurance - (12000*1/36 months)
333.33
License fees
2,000.00
Business promotion expenses
4,000.00
Depreciation expense
1,700.00
Total Expenses and Loses
50,833.33
Expected Net (loss) for First Month
-10,833.33
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