Content Problem 944 o 1 Part1of9 0.5 5 points 0 E B ezto.mheducation.com CL +BE m McGraw Hill - Connect 0 Question 1 - Problem 9-44 - Connect u Homework Help - Q&A from Online Tutors - Course Hero Saved Help Required information [The following information applies to the questions displayed below] \"We really need to get this new material-handling equipment in operation just after the new year begins I hope we can nance it largely with cash and marketable securities. but if necessary we can get a short-term loan down at MetroBank.\" This statement by Beth Davies-Lowry, president of Intercoastal Electronics Company, concluded a meeting she had called with the firm's top management. Intercoastal is a small, rapidly growing wholesaler of consumer electronic products. The rm's main product lines are small kitchen appliances and power tools' Marcia Wilcox. Intercoastal's General Manager of Marketing, has recently completed a sales forecast. She believes the company's sales during the rst quarter of 20x1 will increase by 10 percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for several months. Intercoastal's projected balance sheet as of December 31, 20x0, is as follows: Cash $ 50,000 Accounts receivable 210,000 Marketable securities 25,000 Inventory 192,500 Buildings and equipment (net of accumulated depreciation) 547,000 Total assets $1,024 50. Accounts payable :1; 183,750 Bond interest payable 9,375 Property taxes payable 2,400 Bonds payable (1596; due in 20x6) 150,000 Common stock 500,000 Retained earnings 178,975 Total liabilities and stockholders' equity $1,024,500 Jack Hanson, the assistant controller, is now preparing a monthly budget for the rst quarter of 20x1. In the process, the following information has been accumulated: 1. Projected sales for December of 20x0 are $500,000. Credit sales typically are 60 percent of total sales. Intercoastal's credit experience indicates that 30 percent ofthe credit sales are collected during the month of sale, and the remainder are collected during the following months , m _ Prev l 1 2 3 9 of9 ii! Next > Save & Exit Submit Check my work 7. Prepare Intercoastal Electronics' budgeted income statement for the first quarter of 20x1. (Ignore income taxes.) Selling and administrative expenses: Total selling and administrative expenses 8. Prepare Intercoastal Electronics' budgeted statement of retained earnings for the first quarter of 20x1. INTERCOASTAL ELECTRONICS COMPANY Budgeted Statement of Retained Earnings For the First Quarter of 20x1 Retained earnings, 12/31/x0 Add: Net income Less: Dividends Retained earnings, 3/31/x19. Prepare lntercoastal Electronics' budgeted balance sheet as of March 31, 20x1. (Hint:On March 31, 20x1, Bond Interest Payable is $3,750 and Property Taxes Payable is $600.) (Round your answers to the nearest whole dollar.) Total assets [- Total liabilities and stockholders' equity [- Required information [T he following information applies to the questions displayed below. ] \"We really need to get this new material-handling equipment in operation just after the new year begins. I hope we can finance it largely with cash and marketable securities, but if necessary we can get a shortterm loan down at MetroBank." This statement by Beth Davies-Lowry, president of lntercoastal Electronics Company, concluded a meeting she had called with the firm's top management. lntercoastal is a small. rapidly growing wholesaler of consumer electronic products. The firm's main product lines are small kitchen appliances and power tools. Marcia Wilcox, lntercoastal's General Manager of Marketing, has recently completed a sales forecast. She believes the company's sales during the first quarter of 20x1 will increase by 10 percent each month over the previous month's sales. Then Wilcox expects sales to remain constant for several months. lntercoastal's projected balance sheet as of December 31, 20x0, is as follows: Cash 35 50.000 Accounts receivable 210,000 Marketable securities 25,000 Inventory 192,500 Buildings and equipment (net of accumulated depreciation) 547.000 Total assets $1,024,500 Accounts payable $ 183,750 Bond interest payable 9,375 Property taxes payable 2,400 Bonds payable (1595: due in 20x6) 150,000 Common stock 500.000 Retained earnings 178,975 Total liabilities and stockholders' equity $1,024.500 Jack Hanson, the assistant controller, is now preparing a monthly budget for the rst quarter of 20x1. In the process, the following information has been accumulated: 1. Projected sales for December of 20x0 are $500,000. Credit sales typically are 60 percent of total sales. lntercoastal'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 denerallv runs at 70 percent of sales. Inventorv is purchased on account. and 50 5. 6. 7. are COIIECIIEG during the TOIIOWII'IQ month. . 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 rm attempts to have inventory at the end of each month equal to half of the next month's projected cost of goods sold. Hanson has estimated that Intercoastal's other monthly expenses will be as follows: Sales salaries $35,000 Advertising and promotion 16,000 Administrative salaries 35,000 Depreciation 15,000 Interest on bonds 1,875 Property taxes 600 In addition, sales commissions run at the rate of1 percent of sales. . Intercoastal's president, Davies-Lowry, has indicated that the rm should invest $125,000 in an automated inventory- handling system to control the movement of inventory in the firm's warehousejust after the new year begins. These equipment purchases will be financed primarily from the firm's cash and marketable securities. However, Davies-Lowry believes that Intercoastal needs to keep a minimum cash balance of $25,000. If necessary, the remainder of the equipment purchases will be financed using short-term credit from a local bank. The minimum period 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, Davies-Lowry has decided it should be paid off by the end of the rst quarter if possible. Intercoastal's board of directors has indicated an intention to declare and pay dividends of $50,000 on the last day of each quarter. 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. Property taxes are paid semiannually on February 28 and August 31 for the preceding six-month period. Required: Prepare Intercoastal Electronics Company's master budget for the rst quarter of 20x1 by completing the following schedules and statements. \fe 2. Cash receipts budget: 0 Answer is complete and correct. Cash sales $ 728,200 0 Cash collections from credit sales made during current month 99,000 0 108,900 0 119,790 0 327,690 0 Cash collections from credit sales made during preceding month Total cash receipts 210,000 9 $ 529,000 $ 581,900 231,000 9 254,100 0 695,100 0 $ 640,090 $ 1,750,990 k 3. Purchases budget: 0 Answer is complete and correct. Budgeted cost of goods sold 350.000 0 423.500 0 465.850 0 $ 1274.350 0 Purchases 367.500 Add: Desired ending inventory 192,500 0 211,750 0 232,925 9 232,925 Q 232,925 0 Total goods needed 542,500 596,750 656,425 698,775 $ 1,507,275 Less: Expected beginning inventory 175,000 0 192,500 0 211,750 0 232,925 0 192,500 0 465.850 $ 1,314,775 4. Cash disbursements budget: (Round your inventory purchases up to the nearest whole dollar.) Inventory purchases: Cash payments for purchases during the current month Cash payments for purchases during the preceding month Total cash payments for inventory purchases other expenses: Sales salaries Advertising and promotion Administrative salaries Interest on bonds Property taxes Sales commissions Total cash payments for other expenses Total cash disbursements __ __ 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 $ 0 $ 0 $ 0 $ 0 Sale of marketable securities (1/2/x1) Proceeds from bank loan (1/2/x1) 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/x16. 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