Question
Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant
Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2017 and reports a balance sheet at December 31, 2016 as follows:
Endless Mountain Company | ||||||
Balance Sheet | ||||||
December 31, 2016 | ||||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 46,200 | ||||
Accounts receivable (net) | 260,000 | |||||
Raw materials inventory (4,500 yards) | 11,250 | |||||
Finished goods inventory (1,500 units) | 32,250 | |||||
Total current assets | $ | 349,700 | ||||
Plant and equipment: | ||||||
Buildings and equipment | 900,000 | |||||
Accumulated depreciation | (292,000 | ) | ||||
Plant and equipment, net | 608,000 | |||||
Total assets | $ | 957,700 | ||||
Liabilities and Stockholders Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 158,000 | ||||
Stockholders equity: | ||||||
Common stock | $ | 419,800 | ||||
Retained earnings | 379,900 | |||||
Total stockholders equity | 799,700 | |||||
Total liabilities and stockholders equity | $ | 957,700 | ||||
The companys chief financial officer (CFO), in consultation with various managers across the organization has developed the following set of assumptions to help create the 2017 budget:
The budgeted unit sales are 12,000 units, 37,000 units, 15,000 units, and 25,000 units for quarters 1-4, respectively. Notice that the company experiences peak sales in the second and fourth quarters. The budgeted selling price for the year is $32 per unit. The budgeted unit sales for the first quarter of 2018 is 13,000 units.
All sales are on credit. Uncollectible accounts are negligible and can be ignored. Seventy-five percent of all credit sales are collected in the quarter of the sale and 25% are collected in the subsequent quarter.
Each quarters ending finished goods inventory should equal 15% of the next quarters unit sales.
Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarters ending raw materials inventory should equal 10% of the next quarters production needs. The estimated ending raw materials inventory on December 31, 2017 is 5,000 yards.
Seventy percent of each quarters purchases are paid for in the quarter of purchase. The remaining 30% of each quarters purchases are paid in the following quarter.
Direct laborers are paid $18 an hour and each unit of finished goods requires 0.25 direct labor-hours to complete. All direct labor costs are paid in the quarter incurred.
The budgeted variable manufacturing overhead per direct labor-hour is $3.00. The quarterly fixed manufacturing overhead is $150,000 including $20,000 of depreciation on equipment. The number of direct labor-hours is used as the allocation base for the budgeted plantwide overhead rate. All overhead costs (excluding depreciation) are paid in the quarter incurred.
The budgeted variable selling and administrative expense is $1.25 per unit sold. The fixed selling and administrative expenses per quarter include advertising ($25,000), executive salaries ($64,000), insurance ($12,000), property tax ($8,000), and depreciation expense ($8,000). All selling and administrative expenses (excluding depreciation) are paid in the quarter incurred.
The company plans to maintain a minimum cash balance at the end of each quarter of $30,000. Assume that any borrowings take place on the first day of the quarter. To the extent possible, the company will repay principal and interest on any borrowings on the last day of the fourth quarter. The companys lender imposes a simple interest rate of 3% per quarter on any borrowings.
Dividends of $15,000 will be declared and paid in each quarter.
The company uses a last-in, first-out (LIFO) inventory flow assumption. This means that the most recently purchased raw materials are the first-out to production and the most recently completed finished goods are the first-out to customers.
Required:
2. Prepare the companys budgeted statement of cash flows for the year ended December 31, 2017.
I Can't figure out which piece/element I am missing on the below Statement of cash flows:
Endless Mountain Company Cash Budget For the Year Ended December 31, 2017 Quarter 4 Year $ 46,200 30,000 244,649 314,337 46,200 Beginning cash balance Add cash receipts 984,000 Collection from customers Total cash available Less cash disbursements 548,000 656,000 720,000 900,6491,034,337 2,954,200 2,908,000 594,2001,014,000 Direct materials Direct labor Manufacturing overhead Selling and administrative Dividends 291,287 72,225 142,039 124,000 15,000 644,551 (50,351) 292,176 151,650 155,275 155,250 15,000 769,351 244,649 226,936 74,250 142,375 127,750 15,000 586,311 314,338 218,053028,453 402,525 587,089 547,250 60,000 625,1032,625,317 328,883 104,400 147,400 140,250 15,000 Total cash disbursements Excess or (deficiency) of cash available over disbursements Financing 409,234 80,351 (80,351) (9,642) (9,642) $30,000 $244,649 $ 314,338 $ 319,241$ 319,241 80,351 Borrowings (at the beginnings of quarters) Repayment (at end of the year) Interest (at 3% per quarter) (80,351) (9,642) (89,993) Total financing Ending cash balance 80,351Step by Step Solution
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