Complete a master budget for ILA Companys second year in operation based on the attached assumption pages. a. You will need to complete all relevant supporting schedules / budgets to provide a final cash budget (for each quarter and year end), budgeted income statement (for year end)
Year 2 cash budget (for each quarter and year end)
Year 2 budgeted income statement (for year end)
Year 2 budgeted balance sheet (at year end)
Assumptions for ILA Company 1) Sales Sales Year one fourth quarter sales for product A, include 673 orders o Each order averaged 598 units (for a total of 402,454 units) Year one fourth quarter sales for product B, include 119 orders o Each order averaged 2,238 units (266,322 units total) Due to an aggressive advertising campaign, management believes that ALL sale orders (for both products in year two will be 19% higher than in year one. ILA Company sales (both products) are seasonal. Therefore, sale orders: o In first quarter year two are 14% higher than in fourth quarter of year two o In second quarter year two are 38% lower than in fourth quarter ofyear two o In third quarter year two are 25% lower than in fourth quarter of year two o Hint: calculate the increase in sales for year two based on fourth quarter first (ie. fourth quarter year two is a 19% increase from year one fourth quarter), and then adjust year two quarters one through three based on the precedingthree assumptions for seasonality of sales. An example is provided for product A as a supplement to this document. o Note: changes across each quarter relates to sales orders only. The average units per order are unaffected. As shown in the example, ROUND all sale orders to the whole order value. You will NOT need to round the final units o NOTE: D0 NOT ROUND ANY OTHER VALUES IN THE CASE BEYOND THESE SALE0RDER VALUES FOR PRODUCTS A AND "B" o However, you can format Excel to present the values as whole numbers Le. you do not need to show the decimal values in the schedules/budgets just don't round them) Assume year three sales will be 6.75% lower than the sales in the corresponding quarter of year two sales o Again round orders to the whole order value (thus, you should notneed to round the final units ILA Company can sell product A for $49.00 per unit, and product Bat$59.00 per unit. Sales are collected: 32% in cash Of the 68% that are credit sales: o 41% is collected in the current quarter o 26% is collected in the first quarter after the sales quarter o 29.5% is collected in the second quarter after the sales quarter o 3.5% is estimated to not be collected, therefore: You will need to set up a bad debt expense in each quarter of sales (for the 3.5% of sales that is estimated to not be collected) As an illustrative example: assume quarter one credit sales are $1,000,000 (example only), then you would need to create a bad debt expense in Q1 of $35,000 ($1,000,000 3.5%) ACCT 2102 Fall 2016 ILA Company Case Project Page 4
