Cash Accounts receivable Marketable securities Inventory Buildings and equipment (net of accumulated depreciation) Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable (7%; due in 28x6) Common stock Retained earnings Total liabilities and stockholders' equity $ 35,000 126,eee 15,000 115,580 674, $ 965,500 $ 119,250 8,750 2,480 388,eee 358,eee 194,100 $ 965, see Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following Information has been accumulated: 1. Projected sales for December of 20x0 are $300,000. Credit sales typically are 60 percent of total sales. Intercoastal's credit experience Indicates that 30 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. 2. Intercoastal's cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 50 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. 3. Hanson has estimated that Intercoastal's other monthly expenses will be as follows: Sales salaries Advertising and promotion Administrative salaries Depreciation Interest on bonds Property taxes $ 7,00 16,000 7, een 15,000 1,750 6ee In addition, sales commissions run at the rate of 1 percent of sales. 4. Intercoastal's president, Davles-Lowry, has indicated that the firm should Invest $125,000 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, Davles-Lowry believes that Intercoastal needs to keep a minimum cash balance of $30,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum perlod for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davles-Lowry has decided it should be paid off by the end of the first quarter of possible. 5. Intercoastal's board of directors has indicated an Intention to declare and pay dividends of $50,000 on the last day of each quarter. 6. 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 31 and July 31 for the preceding six-month period. 7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period. 5. Complete the first three lines of the summary cash budget. Then do the analysis of short-term financing needs in requirement (6). Then finish requirement (5). 20x1 January February March First Quarter Cash receipts (from part 2) Less: Cash disbursements (from part 4) Change in cash balance during period due to operations Sale of marketable securities (1/2/x1) Proceeds from bank loan (1/21x1) Purchase of equipment Repayment of bank loan (3/31/x1) Interest on bank loan Payment of dividends Change in cash balance during first quarter Cash balance, 1/1/x1 Cash balance, 3/31/x1 6. Calculation of required short-term borrowing. Projected cash balance as of December 31, 20x0 Less: Minimum cash balance Cash available for equipment purchases Projected proceeds from sale of marketable securities Cash available Less: Cost of investment in equipment Required short-term borrowing Cash Accounts receivable Marketable securities Inventory Buildings and equipment (net of accumulated depreciation) Total assets Accounts payable Bond interest payable Property taxes payable Bonds payable (7%; due in 28x6) Common stock Retained earnings Total liabilities and stockholders' equity $ 35,000 126,eee 15,000 115,580 674, $ 965,500 $ 119,250 8,750 2,480 388,eee 358,eee 194,100 $ 965, see Jack Hanson, the assistant controller, is now preparing a monthly budget for the first quarter of 20x1. In the process, the following Information has been accumulated: 1. Projected sales for December of 20x0 are $300,000. Credit sales typically are 60 percent of total sales. Intercoastal's credit experience Indicates that 30 percent of the credit sales are collected during the month of sale, and the remainder are collected during the following month. 2. Intercoastal's cost of goods sold generally runs at 70 percent of sales. Inventory is purchased on account, and 50 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. 3. Hanson has estimated that Intercoastal's other monthly expenses will be as follows: Sales salaries Advertising and promotion Administrative salaries Depreciation Interest on bonds Property taxes $ 7,00 16,000 7, een 15,000 1,750 6ee In addition, sales commissions run at the rate of 1 percent of sales. 4. Intercoastal's president, Davles-Lowry, has indicated that the firm should Invest $125,000 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, Davles-Lowry believes that Intercoastal needs to keep a minimum cash balance of $30,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum perlod for such a loan is three months. Hanson believes short-term interest rates will be 10 percent per year at the time of the equipment purchases. If a loan is necessary, Davles-Lowry has decided it should be paid off by the end of the first quarter of possible. 5. Intercoastal's board of directors has indicated an Intention to declare and pay dividends of $50,000 on the last day of each quarter. 6. 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 31 and July 31 for the preceding six-month period. 7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period. 5. Complete the first three lines of the summary cash budget. Then do the analysis of short-term financing needs in requirement (6). Then finish requirement (5). 20x1 January February March First Quarter Cash receipts (from part 2) Less: Cash disbursements (from part 4) Change in cash balance during period due to operations Sale of marketable securities (1/2/x1) Proceeds from bank loan (1/21x1) Purchase of equipment Repayment of bank loan (3/31/x1) Interest on bank loan Payment of dividends Change in cash balance during first quarter Cash balance, 1/1/x1 Cash balance, 3/31/x1 6. Calculation of required short-term borrowing. Projected cash balance as of December 31, 20x0 Less: Minimum cash balance Cash available for equipment purchases Projected proceeds from sale of marketable securities Cash available Less: Cost of investment in equipment Required short-term borrowing