AudioFile Products Ltd is a retailer that sells sound systems The company is planning its cash needs for the month of January, 2018 In the past, AudioFile has had to borrow money during the post Christmas season to offset a significant decline in sales The following information has been assembled to assist in preparing a cash flow forecast for January January 2018 Forecasted Income Statement Sales $200,000 Cost of goods sold 150,000 Gross profit 50,000 Variable selling expenses $10,000 Fixed administrative expenses 20,000 30,000 Forecasted net operating income $ 20,000 (1) Sales are 10 for cash and 90 on credit (2) Credit sales are collected over a three month period with 40 collected in the month of sale, 30 in the following month, and 20 in the second month following sale November 2017 sales totaled $300,000 and December 2017 sales totaled $500,000 (3) 40 of a months inventory purchases are paid for in the same month The remaining 60 are paid in the following month Accounts payable relate solely to inventory purchases At December 31, these totaled $400,000 (4) The company maintains its ending inventory levels at 60 of the cost of the merchandise to be sold in the following month The merchandise inventory at December 31, 2017 was $90,000 February 2018 sales are budgeted at $150,000 Gross profit percentage is expected to remain unchanged (5) The company pays a $10,000 monthly cash dividend to shareholders (6) The cash balance at December 31, 2017 was $30,000 the company must maintain a cash balance of at least this amount at the end of each month (7) The company can borrow on its operating loan in increments of $10,000 at the beginning of each month, up to a total loan balance of $500,000 The interest rate on this loan is 1 per month payable in the month following the loan There is no operating loan at December 31, 2017 Required Prepare a Cash Flow Forecast for AudioFile for the month of January 2018 Include appropriate supporting schedules Refer to Problem 3 2 on page 127 of Selected Topics in Management Accounting keeping in mind that AudioFile has been in business for awhile and the operating budget worksheet is not required

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AudioFile Products Ltd. is a retailer that sells sound systems. The company is planning its cash needs for the month of January, 2018. In the

AudioFile Products Ltd. is a retailer that sells sound systems. The company is planning its cash needs for the month of January, 2018. In the past, AudioFile has had to borrow money during the post-Christmas season to offset a significant decline in sales. The following information has been assembled to assist in preparing a cash flow forecast for January.

January 2018 Forecasted Income Statement

Sales		$200,000
Cost of goods sold		150,000
Gross profit		50,000
Variable selling expenses	$10,000
Fixed administrative expenses	20,000	30,000
Forecasted net operating income		$ 20,000

(1)	Sales are 10% for cash and 90% on credit.
(2)	Credit sales are collected over a three-month period with 40% collected in the month of sale, 30% in the following month, and 20% in the second month following sale. November 2017 sales totaled $300,000 and December 2017 sales totaled $500,000.
(3)	40% of a months inventory purchases are paid for in the same month. The remaining 60% are paid in the following month. Accounts payable relate solely to inventory purchases. At December 31, these totaled $400,000.
(4)	The company maintains its ending inventory levels at 60% of the cost of the merchandise to be sold in the following month. The merchandise inventory at December 31, 2017 was $90,000. February 2018 sales are budgeted at $150,000. Gross profit percentage is expected to remain unchanged.
(5)	The company pays a $10,000 monthly cash dividend to shareholders.
(6)	The cash balance at December 31, 2017 was $30,000; the company must maintain a cash balance of at least this amount at the end of each month.
(7)	The company can borrow on its operating loan in increments of $10,000 at the beginning of each month, up to a total loan balance of $500,000. The interest rate on this loan is 1% per month payable in the month following the loan. There is no operating loan at December 31, 2017.

Required:

Prepare a Cash Flow Forecast for AudioFile for the month of January 2018. Include appropriate supporting schedules. Refer to Problem 3-2 on page 127 of Selected Topics in Management Accounting keeping in mind that AudioFile has been in business for awhile and the operating budget worksheet is not required.