15 5 Red Dragon Company is a manufacturer of outdoor furniture and would like to get a better understanding of 6 their cash budget. They have provided you with information about their collections and spending with a 7 request you prepare a cash budget. Here is the expected sales by quarter for 2020: 9 Quarter 1 Quarter2 Quarter 3 Quarter 4 10 Expected Sales 600,000 1,600,000 800,000 1,000,000 11 12 Red Dragon Company has 100% of their sales on credit, with 60% collected in the quarter of the sale and 40% 13 collected in the quarter after the original sale. Accounts Receivable for January 1 is $200,000 and will be 14 collected during the first quarter. 16 Red Dragon Company makes all material purchases on credit paying 80% in the quarter of purchase and 20% 17 in the quarter after purchase. The Accounts Payable for January 1 is $80,000 and is paid in the first quarter. In 18 addition Red Dragon will pay dividends to their shareholders of $40,000 in the second quarter and $80,000 in 19 the third quarter as well as expected equipment purchases of $650,000 in the third quarter. 20 21 Quarter 1 Quarter2 Quarter 3 Quarter 4 Budget Material 250,000 295,000 217,500 217,500 22 Purchases 23 Budget Direct Labour 126,000 192,000 132,000 156,000 Budget Manufacturin 24 B Overhead 80,750 89,000 81,500 80,750 25 Budget Selling & Admir 110,000 160,000 120,000 130,000 26 Budget Income Tax 100,000 57,000 270,000 100,000 27 Red Dragon Company has a expected January 1, 2020 cash balance of $130,000 and a minimum ending cash balance of $10,000 in each quarter. To ensure they maintain the desired cash balance, Red Dragon set up a line of credit with their bank at 12% per year with interest only payable at the point of repayment. Assume loans, which have to be at increments of $1,000, can only be taken at the start of a quarter and repaid at the end of a quarter a, Prepare a Schedule of Expected Collections for the year by quarter (3 marks) Red Dragon Company Schedule of Expected Collections For the Year Ending December 31, 2020 Expected Sales Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Total Collections 1 Working Space b. Calculate the December 31, 2020 Accounts Receivable balance. (1 mark) December 31, 2020 Accounts Receivable Working Space ANWSER G 33 Total 92 c. Prepare a Schedule of Expected Disbursements for the year by quarter (6 marks) 93 -94 Red Dragon Company 95 Schedule of Expected Disbursements 96 For the Year Ending December 31, 2020 97 99 Purchases Quarter 1 Quarter 2 Quarter 3 Quarter 4 99 200 Direct Materials 01 02 03 04 05 06 07 08 09 Total Collections 10 11 12 Working Space 13 14 15 16 17 18 19 20 122 d. Prepare the Cash Budget by quarter for 2020. (10 marks) 123 124 Red Dragon Company 125 Cash Budget 126 For the Year Ending December 31, 2020 127 128 Quarter 1 Quarter 2 129 Beginning cash balance 130 Add: Cash receipts 131 Quarter 3 Quarter 4 Total 132 133 Total receipts 134 Total available cash 35 Less: Disbursements 36 37 38 39 40 41 Total disbursements 42 Excess cash available over disbursements 43 Financing 44 -45 46 47 Total financing 48 Ending cash balance 49 50 ** Interest on Loan repayment 51 52 53 54 55 56 57 58 59 50 5: ANWSER ANWSER ANWSER ANWSER