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ALL GIVEN INFO LISTED IN FIRST PICTURE. The following information applies to the questions displayed below. ] We really need to get this new
ALL GIVEN INFO LISTED IN FIRST PICTURE.
The following information applies to the questions displayed below.
We really need to get this new material
handling equipment in operation just after the new year begins. I
hope we can finance it largely with cash and marketable securities
but if necessary we can get a short
term
loan down at MetroBank." This statement by Beth Davies
Lowry, president of Intercoastal Electronics
Company, concluded a meeting she had called with the firm's top management. Intercoastal is a small,
rapidly growing wholesaler of consumer electronic products. The firm's main product lines are small kitchen
appliances and power tools. Marcia Wilcox, Intercoastal's General Manager of Marketing, has recently
completed a sales forecast. She believes the company's sales during the first quarter of
times
will increase by
percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for
several months. Intercoastal's projected balance sheet as of December
x
is as follows:
Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of
times
In the
process, the following information has been accumulated:
Projected sales for December of
times
are $
Credit sales typically are
percent of total sales.
Intercoastal's credit experience indicates that
percent of the credit sales are collected during the
month of sale, and the remainder are collected during the following month.
Intercoastal's cost of goods sold generally runs at
percent of sales. Inventory is purchased on account,
and
percent of each month's purchases are paid during the month of purchase. The remainder is paid
during the following month. In order to have adequate stocks of inventory on hand, the firm attempts to
have inventory at the end of each month equal to half of the next month's projected cost of goods sold.
Hanson has estimated that Intercoastal's other monthly expenses will be as follows:
In addition, sales commissions run at the rate of
percent of sales.
Intercoastal's president, Davies
Lowry, has indicated that the firm should invest $
in an automated
inventory
handling system to control the movement of inventory in the firm's warehouse just after the new
year begins. These equipment purchases will be financed primarily from the firm's cash and marketable
securities
However Davies
Lowry believes that Intercoastal needs to keep a minimum cash balance of
$
If necessary, the remainder of the equipment purchases will be financed using short
term credit
from a local bank. The minimum period for such a loan is three months. Hanson believes short
term
interest rates will be
percent per year at the time of the equipment purchases. If a loan is necessary,
Davies
Lowry has decided it should be paid off by the end of the first quarter if possible.
Intercoastal's board of directors has indicated an intention to declare and pay dividends of $
on
the last day of each quarter.
The interest on any short
term borrowing will be paid when the loan is repaid. Interest on Intercoastal's
bonds is paid semiannually on January
and July
for the preceding six
month period.
Property taxes are paid semiannually on February
and August
for the preceding six
month period.
Required:
Prepare Intercoastal Electronics Company's master budget for the first quarter of
times
by completing the
following schedules and statements.
PLEASE PREPARE THE FOLLOWING:
Sales budget:
Cash receipts budget:
Purchases Budget
Cash disbursements budget:
Complete the first three lines of the summary cash budget. Then do the analysis of short
term financing needs in requirement
Then finish requirement
Calculation of required short
term borrowing.
Prepare Intercoastal Electronics
budgeted income statement for the first quarter of
x
Ignore income taxes.
Prepare Intercoastal Electronics
budgeted statement of retained earnings for the first quarter of
x
Prepare Intercoastal Electronics
budgeted balance sheet as of March
x
Hint: On March
x
Bond Interest Payable is $
and Property Taxes Payable is $
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