Bellerose Used Cars Ltd is planning its cash needs for the month of January, 2022 The statement of financial position showed the following at December 31, 2021 Assets Current Cash $10,000 Accounts receivable 720,000 Inventory 288,000 1,018,000 PPE, net 800,000 $1,818,000 Liabilities Current Operating loan $100,000 Accounts payable 403,200 503,200 Non current borrowings 600,000 1,103,200 Shareholders' Equity Share capital 5,000 Retained earnings 709,800 714,800 $1,818,000 Other information 1 January total sales (100 units) $800,000 2 Cash collection a cash sales each month 0 b credit sales collected in same month 20 c credit sales collected in next month 80 3 December credit sales $900,000 4 Inventory information a February total sales $700,000 b Gross profit ratio all months 40 c purchases paid in cash same month 20 d inventory on hand needed for next month 60 5 Accounts payable at Dec 31 all relate to inventory purchases and will be paid in full in January 6 Sales commissions ( of sales revenue) 5 7 Fixed expenses a Depreciation per month $10,000 b Salaries per month $100,000 c Other $150,000 8 Interest is paid monthly on opening balances of the operating loan and non current debt Interest rate per month 1 9 Income tax rate 20 10 Monthly repayments of principal on non current debt $10,000 11 Desired cash balance at end of January $40,000 12 Maximum operating loan balance at end of January $600,000 Any excess cash will be used to pay down the operating loan A larger operating loan will be borrowed to offset any cash deficiency Required a (12 marks) Using the budget worksheet on the following page, record the above information Assume that all 2021 income taxes have been paid prior to January 1, 2022 ASSSETS LIABILITIES S H EQUITY Trans Cash Acc Rec Invent PPE Op Loan Acc Pay L T Debt Share Capital Ret Earn Desc Cf 10,000 720 ,000 288,000 800,000 100,000 403,200 600,000 5,000 709,800 Totals

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 28, 2024

Bellerose Used Cars Ltd. is planning its cash needs for the month of January, 2022. The statement of financial position showed the following at December

Bellerose Used Cars Ltd. is planning its cash needs for the month of January, 2022. The statement of financial position showed the following at December 31, 2021.

	Assets
	Current
	Cash		$10,000
	Accounts receivable		720,000
	Inventory		288,000
			1,018,000
	PPE, net		800,000
			$1,818,000

	Liabilities
	Current
	Operating loan		$100,000
	Accounts payable		403,200
			503,200
	Non-current borrowings		600,000
			1,103,200

	Shareholders' Equity
	Share capital		5,000
	Retained earnings		709,800
			714,800
			$1,818,000

Other information:
1.	January total sales (100 units)	$800,000
2.	Cash collection
a.	% cash sales each month	0%
b.	% credit sales collected in same month	20%
c.	% credit sales collected in next month	80%
3.	December credit sales	$900,000
4.	Inventory information
a.	February total sales	$700,000
b.	Gross profit ratio all months	40%
c.	% purchases paid in cash same month	20%
d.	% inventory on hand needed for next month	60%
5.	Accounts payable at Dec. 31 all relate to inventory purchases and will be paid in full in January.

6.	Sales commissions (% of sales revenue)	5%
7.	Fixed expenses
a.	Depreciation per month	$10,000
b.	Salaries per month	$100,000
c.	Other	$150,000
8.	Interest is paid monthly on opening balances of the operating loan and non-current debt. Interest rate per month:

	1%
9.	Income tax rate	20%
10.	Monthly repayments of principal on non-current debt	$10,000
11.	Desired cash balance at end of January.	$40,000
12.	Maximum operating loan balance at end of January	$600,000
	Any excess cash will be used to pay down the operating loan. A larger operating loan will be borrowed to offset any cash deficiency.

Required:

a. (12 marks) Using the budget worksheet on the following page, record the above information. Assume that all 2021 income taxes have been paid prior to January 1, 2022.

ASSSETS

LIABILITIES

S/H EQUITY

Trans.

Cash

Acc. Rec.

Invent.

PPE

Op. Loan

Acc. Pay.

L/T Debt

Share Capital