Chapter $3$ Problem $16$

a$.$ Using the information provided, construct a monthly cash budget for October through December $2021.$ Based on your analysis, will Noble enjoy a surplus of cash, or require external financing?

b$.$ Construct a pro forma income statement for the first fiscal quarter of $2022($Oct$.$ through Dec. $2021)$ and a pro forma balance sheet as of December $31,2021.$ What is your estimated external funding required for December $31?$

c$.$ Does the December $31,2021$ estimated external financing equal your cash surplus $($deficit$)$ for this date from your cash budget?

d$.$ Based on your answers above, construct a cash flow forecast for Noble for the period October through December $2021.$

NOBLE EQUIPMENT CORP.

Facts and assumptions

Sales $(20$ percent for cash, the rest on $30-$day credit terms$)$:

$2021$ Actual $2021$ Projected

July August September October November December

$76,00088,000266,000125,00051,00053,000$

Purchases $($all on $60-$day terms$)$:

$2021$ Actual $2021$ Projected

July August September October November December

$116,000122,000257,00062,00027,00026,000$

Salaries payable monthly $20,000$

Principal payment on debt due in December $25,700$

Interest due in December $9,000$

Dividend payable in December $15,000$

Taxes payable in November $19,000$

Addition to accumulated depreciation in December $4,000$

Cash balance on October $1,202134,000$

Minimum desired cash balance $15,000$

NOBLE EQUIPMENT CORP.

INCOME STATEMENT $($$ thousands$)$

Fiscal year ended September $30,2021$

Net sales $1,581\mathrm{.}6$

Cost of goods sold$11,098\mathrm{.}0$

Gross profits $483\mathrm{.}6$

Selling and administrative expenses$2240\mathrm{.}0$

Interest expense $18\mathrm{.}0$

Depreciation$316\mathrm{.}0$

Net profit before tax $209\mathrm{.}6$

Tax at $33\%69\mathrm{.}2$

Net profit after tax $140\mathrm{.}4$

BALANCE SHEET $($$ thousands$)$

September $30,2021$

Assets

Cash $34\mathrm{.}0$

Accounts receivable $212\mathrm{.}8$

Inventory $425\mathrm{.}0$

Total current assets $671\mathrm{.}8$

Gross fixed assets $135\mathrm{.}0$

Accumulated depreciation $52\mathrm{.}0$

Net fixed assets $83\mathrm{.}0$

Total assets $754\mathrm{.}8$

Liabilities

Bank loan $0\mathrm{.}0$

Accounts payable $379\mathrm{.}0$

Accrued expenses$455\mathrm{.}0$

Current portion long$-$term debt$525\mathrm{.}7$

Taxes payable $56\mathrm{.}0$

Total current liabilities $515\mathrm{.}7$

Long$-$term debt $120\mathrm{.}0$

Shareholders$$ equity $119\mathrm{.}1$

Total liabilities and equity $754\mathrm{.}8$

$1$ Cost of goods sold consists entirely of items purchased during the quarter.

$2$ Selling and administrative expenses consist entirely of salaries.

$3$ Depreciation is straight$-$line at the rate of $$4,000$ per quarter.

$4$ Accrued expenses are not expected to change in the last quarter.

$5$ $$25\mathrm{.}7$ due December $2021.$ No payments for remainder of year.