Please correct answers in RED please. Bonita Products, a rapidly growing distrib

Question

Please correct answers in RED please.

Bonita Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast. Month Sales Month Sales anuary Februar March 904,300 July $1,002,600 August $1,503,900 $1,503,900 $904,300 September $1,610,000 $1,610,000 $1,254,900 November $1,503,900 June $1,405,100 December $1,700,100 $1,158,500 October pri May Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information. All sales are made on credit. Bonita's excellent record in accounts receivable collection is expected to continue, with 60% billings collected in the month after sale and the remaining 40% collected two months after the sale ·Cost of goods sold, Bonita's largest expense, is estimated to equal 40% of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30% during the month of sale. For example, in April, 30% of April cost of goods sold is purchased and 70% of May cost of goods sold is purchased All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase Hourly wages and fringe benefits, estimated at 30% of the current month's sales, are paid in the month incurred .General and administrative expenses are projected to be $1,560,800 for the year. A breakdown o the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter. Salaries and fringe benefits Advertising Property taxes Insurance Utilities Depreciation Total $325,500 378,900 137,400 193,900 178,300 346,800 $1,560,800 Operating income for the first quarter of the coming year is projected to be $324,300. Bonita is subject to a 40% tax rate. The company pays 100% of its estimated taxes in the month following the end of each quarter Bonita maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 1296 line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and a repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $59,200

Explanation / Answer

The figure of Accounts Receivable is incorrect because all credit sales have been collected

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Purchases budget for the second quarter of 2015 Purchases Apr May Jun Total Purchases Apr COGS 139020 139020 May COGS 351372 150588 501960 Jun COGS 393428 168612 562040 Jul COGS 421092 421092 Cash payments budget for the second quarter of 2015 Apr May Jun Total March purchases 108224 108224 Apr purchases 367794 122598 490392 May purchases 408012 408012 Jun purchases 136004 136004 476018 122598 544016 Accounts Payable balance at the end of the second quarter Historically, 75% of purchases are paid for in the month of purchase and the balance (25%) one month after purchase Estimated Accounts Payable at the end of March are: 324672 (108224 x 75/25 ) add Apr purchases 490392 add May purchases 544016 add Jun purchases 181339 Total 1540419 less Apr payments 476018 May payments 122598 Jun payments 544016 1142632 Balance end of second quarter 2015 397787 Correct answer Cash budget for the second quarter of 2015 Apr May Jun Quarter Beginning cash balance 59200 50000 Inflows: Collections from sales Feb sales 401040 Mar sales 542580 Total inflows 1002820 Outflows: Wages (Salaries & Fringe Benefits) 325500 Advertising 378900 Insurance 193900 Utilities 178300 Tax Total outflows 1076600 Net Inflows -73780 Borrowing 50000 Closing cash balance 50000 Total 490392 544016 589704

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