2.
re \& Mike are a retailer of collectable statues and are looking to prepare a quarterly ash budget (April - June) to determine what months they will need to borrow. They ave determined the following information: - Ike \& Mike have one large customer, that has different payment terms from their other customers. This customer - Plenty \& Good, pays 15% up front (month 1) \& the remaining amount over two months, 40% in month two \& 45% in month three. No interest is charged on this balance. - All other sales are collected over a two-month period with 80% in cash, 20% on credit collected the following month. Sales to Plenty \& Good are: February: $93,000 March: $160,000 April: $50,000 May: $185,000 June: $250,000 July: $165,000 Sales to all other customers are: February: $15,000 March: $87,500 April: $66,000 May: $176,000 June: $200,000 July: $90,000 - Cost of sales on Plenty \& Good sales is 85% of monthly sales, except for June when the cost of sales is 75% of that months' sales. All other sales carry cost of sales at 60% of that months' sales. - Ike \& Mike maintain ending inventory equal to 50% of next month's cost of goods sold for Plenty \& Good sales \& 30% for all other customers. They are using a new supplier this quarter therefore there is no opening inventory for the month of April. - Ike \& Mike negotiate favourable terms with their new supplier \& pay over three months, at rates of 25%,65%,10% in month 1&2 \& respectively, there is no opening accounts payable - Selling \& administrative costs are as follows (all paid in cash every month) - Assume that the company can only borrow in $5,000 increments and the beginning of the month, opening cash is $15,000, therefore if Ike \& Mike projects that they will not have enough cash for the month they must borrow. Interest rate on borrowing is 4% and is due the month after borrowing - In the month of April Plenty \& Good need to pay for a piece of equipment purchased in January, the cost of the equipment is $35,000. Required: Prepare a schedule of expected cash collections for the months that make up quarter 2 \& for the total quarter, identify the accounts receivable (5 marks) Prepare the purchases budget for the months that make up quarter 2 (5 marks) Prepare the schedule of expected cash disbursements for purchases (5 marks) Prepare the schedule of disbursements related to selling and administrative expenses (3 marks) Prepare a cash budget using the above information (5 marks) Determine what amounts need to be borrowed and in what month (2 marks) Prepare a quarterlv Income Statement ( 5 marks) re \& Mike are a retailer of collectable statues and are looking to prepare a quarterly ash budget (April - June) to determine what months they will need to borrow. They ave determined the following information: - Ike \& Mike have one large customer, that has different payment terms from their other customers. This customer - Plenty \& Good, pays 15% up front (month 1) \& the remaining amount over two months, 40% in month two \& 45% in month three. No interest is charged on this balance. - All other sales are collected over a two-month period with 80% in cash, 20% on credit collected the following month. Sales to Plenty \& Good are: February: $93,000 March: $160,000 April: $50,000 May: $185,000 June: $250,000 July: $165,000 Sales to all other customers are: February: $15,000 March: $87,500 April: $66,000 May: $176,000 June: $200,000 July: $90,000 - Cost of sales on Plenty \& Good sales is 85% of monthly sales, except for June when the cost of sales is 75% of that months' sales. All other sales carry cost of sales at 60% of that months' sales. - Ike \& Mike maintain ending inventory equal to 50% of next month's cost of goods sold for Plenty \& Good sales \& 30% for all other customers. They are using a new supplier this quarter therefore there is no opening inventory for the month of April. - Ike \& Mike negotiate favourable terms with their new supplier \& pay over three months, at rates of 25%,65%,10% in month 1&2 \& respectively, there is no opening accounts payable - Selling \& administrative costs are as follows (all paid in cash every month) - Assume that the company can only borrow in $5,000 increments and the beginning of the month, opening cash is $15,000, therefore if Ike \& Mike projects that they will not have enough cash for the month they must borrow. Interest rate on borrowing is 4% and is due the month after borrowing - In the month of April Plenty \& Good need to pay for a piece of equipment purchased in January, the cost of the equipment is $35,000. Required: Prepare a schedule of expected cash collections for the months that make up quarter 2 \& for the total quarter, identify the accounts receivable (5 marks) Prepare the purchases budget for the months that make up quarter 2 (5 marks) Prepare the schedule of expected cash disbursements for purchases (5 marks) Prepare the schedule of disbursements related to selling and administrative expenses (3 marks) Prepare a cash budget using the above information (5 marks) Determine what amounts need to be borrowed and in what month (2 marks) Prepare a quarterlv Income Statement ( 5 marks)
