1 75 points Required a. October sales are estimated to be $280,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 25 percent per month Prepare a sales budget. b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale Prepare a schedule of cash receipts c. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $13,600. Assume that all purchases are made on account. Prepare an inventory purchases budget d. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases e. Budgeted selling and administrative expenses per month follow. Book Print Deferences Salary expenst (fixed) $19,60 Sales comissions 5% of Sales Supplies expense 2% of Sales Utilities (fixed) $3,000 Depreciation on store fixtures (fixed) 55,600 Rent (fixed) $5,400 Miscellaneous (fixed) 5 2,800 "The capital expenditures budget indicates that Vernon will spend $237600 on October 1 for store fixtures, which are expected to have a $36.000 salvage value and a three year (36 month) useful life Use this information to prepare a selling and administrative expenses budget 1. Utilities and sales commissions are paid the month after they are incurred all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses 9. Vernon borrows funds, in increments of $1.000, and repays them on the last day of the month Repayments may be made in any amount available. The company also pays its vendors on the last day of the month It pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $28,000 cash cushion Prepare a cash budget h. Prepare a proforma Income statement for the quarter L. Prepare a pro forma balance sheet at the end of the quarter . Prepare a pro forma statement of cash flows for the quartet Required A Required B Required C Required D Required E Required F Required Required H Required I Required Vernon borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $28,000 cash cushion. Prepare a cash budget. (Any repayments should be indicated with a minus sign.) Show less Cash Budget October November December 0 126,000 126,000 311,500 311,500 Section 1: Cash Receipts Beginning cash balance Add Cash receipts Total cash available Section 2 Cash Payments For inventory purchases For selling and administrative expenses Interest expense Purchase of store fixtures 389,375 389,375 (210,000) (52,800) (242.930) (58,050) (151,200) (34,400) 0 237,600 0 52.000 (262,800) (300,980) Total budgeted disbursements Section 3. Financing Activities Surplus (shortage) Borrowing (repayment) Ending cash balance 74.000 48.700 88,395 S 74000 $ 48.700 $ 88,395 Required A Required B Required C Required D Required E Required F Required G Required H Required 1 Required) Prepare a pro forma income statement for the quarter. VERNON COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 (Sales revenue $ 1,067,500 Cost of goods sold (640,500) Gross margin 427,000 Selling and administrative expenses (186,925) Operating income 240 075 Interest expense Net Income 5 240,075 (Required Required I > Required A Required B Required C Required D Required E Required F Required G Required H Required I Required) Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.) VERNON COMPANY Pro Forma Balance Sheet December 31, Year 1 Assets $ 28,000 240,625 13.600 $ 237,600 (16,800) Cash Accounts receivable Inventory Store fixtures Accumulated depreciation Book value of fixtures Total assets Liabilities Accounts payable Utilities payable Sales commissions payable Line of credit liability 220,800 503 025 $ 5 49.970 3.000 21.875 Equity Retained earnings Total liabilities and equity $ 74,845 CETTE Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicated with a minus sign.) 826,875 (604,130) (145,250) >> VERNON COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31. Year 1 Cash flows from operating activities Cash receipts from customers $ Cash payments for inventory Cash payments for selling and administrative expenses Cash payments for interest expense Net cash flows from operating activities Cash flows from investing activities Cash payment for store fixtures Cash flow from financing activities Net inflow from line of credit Net Increase in cash Plus Beginning cash balance Ending cash balance s 77,495 (237.600) 28 000 S 28,000 1 75 points Required a. October sales are estimated to be $280,000, of which 45 percent will be cash and 55 percent will be credit. The company expects sales to increase at the rate of 25 percent per month Prepare a sales budget. b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale Prepare a schedule of cash receipts c. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending inventory equal to 10 percent of the next month's cost of goods sold. However, ending inventory of December is expected to be $13,600. Assume that all purchases are made on account. Prepare an inventory purchases budget d. The company pays 80 percent of accounts payable in the month of purchase and the remaining 20 percent in the following month. Prepare a cash payments budget for inventory purchases e. Budgeted selling and administrative expenses per month follow. Book Print Deferences Salary expenst (fixed) $19,60 Sales comissions 5% of Sales Supplies expense 2% of Sales Utilities (fixed) $3,000 Depreciation on store fixtures (fixed) 55,600 Rent (fixed) $5,400 Miscellaneous (fixed) 5 2,800 "The capital expenditures budget indicates that Vernon will spend $237600 on October 1 for store fixtures, which are expected to have a $36.000 salvage value and a three year (36 month) useful life Use this information to prepare a selling and administrative expenses budget 1. Utilities and sales commissions are paid the month after they are incurred all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses 9. Vernon borrows funds, in increments of $1.000, and repays them on the last day of the month Repayments may be made in any amount available. The company also pays its vendors on the last day of the month It pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $28,000 cash cushion Prepare a cash budget h. Prepare a proforma Income statement for the quarter L. Prepare a pro forma balance sheet at the end of the quarter . Prepare a pro forma statement of cash flows for the quartet Required A Required B Required C Required D Required E Required F Required Required H Required I Required Vernon borrows funds, in increments of $1,000, and repays them on the last day of the month. Repayments may be made in any amount available. The company also pays its vendors on the last day of the month. It pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $28,000 cash cushion. Prepare a cash budget. (Any repayments should be indicated with a minus sign.) Show less Cash Budget October November December 0 126,000 126,000 311,500 311,500 Section 1: Cash Receipts Beginning cash balance Add Cash receipts Total cash available Section 2 Cash Payments For inventory purchases For selling and administrative expenses Interest expense Purchase of store fixtures 389,375 389,375 (210,000) (52,800) (242.930) (58,050) (151,200) (34,400) 0 237,600 0 52.000 (262,800) (300,980) Total budgeted disbursements Section 3. Financing Activities Surplus (shortage) Borrowing (repayment) Ending cash balance 74.000 48.700 88,395 S 74000 $ 48.700 $ 88,395 Required A Required B Required C Required D Required E Required F Required G Required H Required 1 Required) Prepare a pro forma income statement for the quarter. VERNON COMPANY Pro Forma Income Statement For the Quarter Ended December 31, Year 1 (Sales revenue $ 1,067,500 Cost of goods sold (640,500) Gross margin 427,000 Selling and administrative expenses (186,925) Operating income 240 075 Interest expense Net Income 5 240,075 (Required Required I > Required A Required B Required C Required D Required E Required F Required G Required H Required I Required) Prepare a pro forma balance sheet at the end of the quarter. (Amounts to be deducted should be indicated by a minus sign.) VERNON COMPANY Pro Forma Balance Sheet December 31, Year 1 Assets $ 28,000 240,625 13.600 $ 237,600 (16,800) Cash Accounts receivable Inventory Store fixtures Accumulated depreciation Book value of fixtures Total assets Liabilities Accounts payable Utilities payable Sales commissions payable Line of credit liability 220,800 503 025 $ 5 49.970 3.000 21.875 Equity Retained earnings Total liabilities and equity $ 74,845 CETTE Required A Required B Required C Required D Required E Required F Required G Required H Required I Required J Prepare a pro forma statement of cash flows for the quarter. (Cash outflows should be indicated with a minus sign.) 826,875 (604,130) (145,250) >> VERNON COMPANY Pro Forma Statement of Cash Flows For the Quarter Ended December 31. Year 1 Cash flows from operating activities Cash receipts from customers $ Cash payments for inventory Cash payments for selling and administrative expenses Cash payments for interest expense Net cash flows from operating activities Cash flows from investing activities Cash payment for store fixtures Cash flow from financing activities Net inflow from line of credit Net Increase in cash Plus Beginning cash balance Ending cash balance s 77,495 (237.600) 28 000 S 28,000