CASE STUDY Bale Electric Company is a small, rapidly growing wholesaler of scientific calculators. Carlo Ancellotti, Bales general manager of marketing, predicts sales of 100,000 units in January 2016, increasing by 10% each month during 2016. Sales revenue in January 2016 is forecast to be $800,000. The sales price will remain constant in 2016. Bales projected balance sheet as at 31 December 2015 is provided as follows: Cash $ 50,000 Accounts receivable 472,500 Inventory 280,000 Buildings and equipment (net of accumulated depreciation) 307,500 Total assets $1,110,000 Accounts payable 315,000 Interest payable 12,500 Long-term borrowings (10%, due in 6 years time) 300,000 Share capital 361,400 Retained earnings 121,100 Total liabilities and shareholders equity $1,110,000 Cristiano Ronaldo (the assistant accountant) is now preparing a monthly budget for the first quarter of 2016, and he needs your help. So far, the following information has been accumulated: Projected sales for December 2015 are $700,000. Credit sales typically are 75 per cent of total sales, with the remainder being cash sales. Bales credit experience indicates that 10 per cent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. Bales cost of goods sold generally runs at 70 per cent of sales. Inventory is purchased on credit, and 40 per cent of each months 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 one-half of the next months projected cost of goods sold. Ronaldo has already prepared the purchases budget for the quarter to save you some work: Purchase budget $ Jan Feb mar COGS 560,000 616,000 677,600 Less OP Inv 280,000 308,000 33800 Plus CI Inv 308,000 338,800 372680 =purchases 588,000 646,800 711480 Sales salaries $21,000 Advertising and promotion $16,000 Administrative salaries $21,000 Other expenses are listed below: Depreciation $25,000 Interest on long-term borrowings $2,500 Ronaldo has estimated that Bales monthly cash expenses will be as follows: In addition, sales commissions run at the rate of 1 per cent of sales revenue. On January 1, a one-off payment of $175,000 is required to purchase new equipment. No depreciation is required to be calculated for this new equipment. Moyes believes that Bale needs to keep a minimum cash balance of $25,000. A short-term credit facility for $100,000 has been arranged with a local bank. The bank has given Bale an introductory offer of 0% interest for the first three months of 2016, although interest of 12% per annum will be charged for amounts borrowed after 31 March 2016. Moyes has decided that Bale should re-pay any short term loan required as soon as possible. Interest on Bales long-term borrowings is paid semi-annually, on 31 January and 31 July, for the preceding six-month period. REQUIRED: You are required to prepare Bales budget for the first quarter of 2016 by completing the following schedules and statements using an Excel spreadsheet: 1. Sales budget in units and revenue (1 mark) 2. Cash receipts budget (3 marks) 3. Cash payments budget (4 marks) 4. Summary cash budget (4 marks) 5. Prepare Bale Electrics budgeted Income Statement for the first quarter using a standard absorption costing approach (Ignore income taxes) (4 marks) 6. Prepare Bale Electrics budgeted Balance Sheet as at 31 March (Hint: On 31 March 2016, interest payable on long-term borrowings is $5,000) (4 marks) 4 marks are allocated for presentation and use of formulas in excel please automate the spreadsheet so it can easily be used for scenario planning or what-if analysis (simulation). For questions 7 9 combined, the number of words should NOT exceed 1,000 in total. 7. Explain the main purposes of budgeting within an organisation (5 marks) 8. Explain why it is important to prepare a cash budget in particular and what the problems are with having too little and too much cash (5 marks) 9. Advise Bales senior management team how they can manage their cash position more effectively to minimise the problems identified in question 8 above (5 marks) 4 marks are allocated for presentation, grammar, spelling and appropriate Harvard referencing where needed. 2 marks are allocated for appropriate teamwork as evidenced by your minutes and any other observations made by your lecture.

CAN YOU HELP ME WITH QUESTION NUMBER 6? HOW TO DO BALANCE SHEET FOR FIRST QUATER? THANK YOU