GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast.

Month	Sales	Month	Sales
January	$900,500	July	$1,503,000
February	$1,006,300	August	$1,503,000
March	$900,500	September	$1,607,400
April	$1,152,600	October	$1,607,400
May	$1,254,200	November	$1,503,000
June	$1,408,000	December	$1,704,800

Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information.

?	All sales are made on credit.
?	GrowMaster's excellent record in accounts receivable collection is expected to continue, with 60 percent of billings collected in the month after sale and the remaining 40 percent collected two months after the sale.
?	Cost of goods sold, GrowMaster's largest expense, is estimated to equal 40 percent of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30 percent during the month of sale. For example, in April, 30 percent of April cost of goods sold is purchased and 70 percent of May cost of goods sold is purchased.
?	All purchases are made on account. Historically, 75 percent of accounts payable have been paid during the month of purchase, and the remaining 25 percent in the month following purchase.
?	Hourly wages and fringe benefits, estimated at 30 percent of the current month's sales, are paid in the month incurred.
?	General and administrative expenses are projected to be $1,562,600 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter.

Salaries and fringe benefits	$	321,400
Advertising	379,900
Property taxes	141,600
Insurance	193,100
Utilities	179,100
Depreciation	347,500
Total	$	1,562,600

?

Operating income for the first quarter of the coming year is projected to be $320,500. GrowMaster is subject to a 40 percent tax rate. The company pays 100 percent of its estimated taxes in the month following the end of each quarter.

?

GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12 percent line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $57,700.

Problem 5-35 GrowMaster Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast. Month January February Sales $900,500 $1,006,300 March April May June $900,500 $1,152,600 $1,254,200 $1,408,000 Month July August Septembe r October November December Sales $1,503,000 $1,503,000 $1,607,400 $1,607,400 $1,503,000 $1,704,800 Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information. All sales are made on credit. GrowMaster's excellent record in accounts receivable collection is expected to continue, with 60 percent of billings collected in the month after sale and the remaining 40 percent collected two months after the sale. Cost of goods sold, GrowMaster's largest expense, is estimated to equal 40 percent of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30 percent during the month of sale. For example, in April, 30 percent of April cost of goods sold is purchased and 70 percent of May cost of goods sold is purchased. All purchases are made on account. Historically, 75 percent of accounts payable have been paid during the month of purchase, and the remaining 25 percent in the month following purchase. Hourly wages and fringe benefits, estimated at 30 percent of the current month's sales, are paid in the month incurred. General and administrative expenses are projected to be $1,562,600 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter. Salaries and fringe benefits $ 321,400 Advertising 379,900 Property taxes 141,600 Insurance 193,100 Utilities 179,100 Depreciation 347,500 Total $ 1,562,600 Operating income for the first quarter of the coming year is projected to be $320,500. GrowMaster is subject to a 40 percent tax rate. The company pays 100 percent of its estimated taxes in the month following the end of each quarter. GrowMaster maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12 percent line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $57,700. Your answer is partially correct. Try again. Prepare the cash receipts budget for the second quarter. (Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Receipts Budget April May June $ $ $ $ $ $ February sales March sales April sales 362040 463280 May sales Totals 1056960 1216160 $ Accounts Receivable balance at the end of second quarter of 2012 LINK TO TEXT Your answer is partially correct. Try again. Prepare the purchases budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Purchases Budget April May $ $ April COGS May COGS June 324296 138984 351344 150576 $ June COGS 392504 July COGS 168216 421764 $ $ $ Totals 1489908 457776 LINK TO TEXT Your answer is partially correct. Try again. Prepare the cash payments budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Payments Budget April May $ $ March purchases April purchases May purchases June purchases June $ 198227 367746 122582 407310 135770 442485 $ 475973 $ 529892 $ 578255 $ Accounts Payable balance at the end of second quarter of 2012 LINK TO TEXT Your answer is partially correct. Try again. Prepare the cash budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.) Cash Budget April May $ June $ Quarter $ $ Beginning Cash balance Collection from Sales Total cash available to spend 59800 50124 327621 543060 1396500 1719500 602860 1446624 2047121 347460 376440 420540 27458 27458 27458 31083 31083 31083 Less: disbursements Wages Salaries Advertising Property taxes Insurance Utilities Income taxes Repayments Total cash disbursements 35975 35975 15933 15933 15933 15109 15109 15109 1119003 936098 129840 149000 1042856 Cash excess (deficiency) -98876 327621 1111023 Financing: Borrow ings 149000 $ $ $ Ending Cash Balance 50124 327621 1111023 $