Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Decatur Doggie Door Company's actual sales and purchases for April and May are shown here, along with forecasted sales and purchases for June through September.

image text in transcribed
Decatur Doggie Door Company's actual sales and purchases for April and May are shown here, along with forecasted sales and purchases for June through September. The company makes 24 percent of its sales for cash and 76 percent on credit. Of the credit sales, 60 percent are collected in the month after the sale, and 40 percent are collected two months later. The company pays for 20 percent of its purchases in the month after purchase and 80 percent two months after. Labor expense equals 17 percent of the current month's sales. Overhead expense equals exist12, 500 per month. Bond interest payments of exist27, 500 are due in June and September. A cash dividend of exist52, 500 is scheduled to be paid in June. Tax payments of exist25, 500 are due in June and September. There is a scheduled capital outlay of exist380,000 in September. Decatur's ending cash balance in May is exist22, 500. The minimum desired ending monthly cash balance is exist10,000. The maximum desired ending monthly cash balance is exist50,000. Excess cash (above exist50,000) is used to buy marketable securities. Marketable securities typically earn a small return, but for this case no return is to be calculated and the Marketable Securities are to be sold before borrowing funds on the company's established Line Of Credit (LOC) in case of a cash shortfall (less than exist10,000). Prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with LOC borrowing and repayments for June through September. Use the tables in the text as a template for completing this problem (be sure to consider the cash sales in the receipts schedule). Round all numbers to the nearest dollar. Then, discuss Decatur's forecasting. What did you learn? What seems to be the most important consideration in preparing the forecast? For problem 7, you may copy EXCEL spreadsheets as a picture without showing the formulas for your answers in each cell

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Risk Sharing Finance

Authors: Bakkali Mirakhor, Saad Abbas

1st Edition

3110590468, 978-3110590463

More Books

Students also viewed these Finance questions