Hello Course Hero,

I just bought the module one and two (business finance) from you. But I have a hard time reading it. The module one seems to be clear, but I think that the module two is incomplete. I attached the module two problem with that email for your answer.

Thank you,

Ernst Guillaume

BUS303 - Business Finance - Comprehensive Problem - Module 2 This problem builds upon each of the different modules to a logical analysis and conclusion, emphasizing the most important aspects of business finance through the completion of each of the four modules. Following is a brief description of each of the modules and the course objectives that are covered with the module. Module One - this module will emphasize the student's grasp of the formation of financial statements and the development of analytical measures to assess the financial condition of the business firm. (CO 1.2, 2.1) Module Two - this module will focus upon the development of pro forma financial statements given various planning assumptions. (CO 1.4) Module Three - this module will require the student to apply working capital analysis techniques and assess the cost of debt to a business firm. (CO 2.2, 3.2, 3.3, 3.4) Module Four - this final module will encompass the application of time-value of money concepts to the business firm's decisions related to the firm's overall cost of capital. (CO 4.1, 4.4) General Guidelines: The proper, and professional, presentation of solutions associated with this comprehensive problem are part of the overall grading of each module. Because all analytic work is to be completed in Excel, but the solution submission is to be in Word, you must become familiar with importing schedules from Excel into Word in a professional manner. Please see the instructions contained in the Getting Started folder in Blackboard. Each module is due as indicated in the Learning Activities folder for the particular week and is to be uploaded into the Assignment as shown in the Grade Center. Sales: 235 per 1000 (widgets). Module Two - 56 points Smith-John makes standard sized widgets for the frazzle industry. These widgets are sold for $235 per thousand. Mr. Smith and Mr. John are asking you to assist with preparations for a meeting with their banker to arrange for financing the company for possible expansion. Based on a sales forecast (below) and other data, Mr. Smith and Mr. John would like you to prepare a monthly cash budget, monthly and quarterly pro forma income statements, a pro forma quarterly balance sheet, and all necessary supporting schedules for the first quarter of 2012. Sales forecast (in units): Sales - units Sales - $'s January 2,150,000 $ 505,250 February 2,350,000 $ 552,250 March 1,950,000 $ 458,250 April 1,750,000 $ 411,250 May 2,150,000 $ 505,250 Prior history shows that the company collects 75% of the sales in the first month after the sale, 20% in the second month after the sale, and the remainder in the third month after the sale. The company pays for materials purchased for production the month after receipt. In general, Mr. Smith and Mr. John like to keep 1.5 months supply of inventory on-hand at month-end in anticipation of sales. Inventory at the beginning of December was 2,400,000 units. (This was not equal to the desired inventory level of the desired 1.5 months supply.) Additionally, the unit sales for October, November and December were 1,900,000, 1,850,000 and 1,325,000, respectively. The major cost of production is the purchase of raw materials in the form of steel rods, which are cut, threaded, and finished. Last year raw material costs were $63 per 1,000 widgets, but Mr. John was notified by the purchasing department that the cost was going to rise to $68 per 1,000 widgets. The company uses FIFO inventory accounting and the purchases for materials are paid for in the month following the purchase. Labor costs are relatively constant at $22 per thousand widgets, since workers are paid on a piecework basis. Overhead is allocated at $12 per thousand widgets and selling and administrative costs are constant at 28% of sales revenue. Labor expense and overhead are direct cash outflows paid in the month incurred, while interest and taxes are paid quarterly. In addition, the company maintains a dividend payout ratio of 40% which is paid quarterly. The company usually maintains a minimum cash balance of $45,000, borrows notes payable if needed, and puts any excess cash into marketable securities. The average tax rate is 30%. Marketable securities are sold before funds are borrowed when a cash shortage is faced. Ignore the interest on short-term borrowings. Interest on the long- term bonds of $9,000 is paid in March, but is allocated over each month for accounting purposes. Taxes are paid in March, but are allocated over each month for accounting purposes. The Dividend payment is made at the end of March. In addition, the company is projecting the purchase of a new piece of manufacturing equipment in March for $50,000 that will be cash on delivery. Required - part 1: Prepare a monthly pro forma income statement and cash budget, and a quarter-ended income statement; make sure to include a sales forecast, production schedule, schedule of cost of goods sold, schedule of cash receipts, schedule of cash payments, net cash flow schedule, and the cash budget. All supporting schedules should include all three months of the quarter. s-vc= cm Required - part 2: Based on the date prepared in part 1, prepare a balance sheet as of the quarter-ended date. Make sure to include a schedule that identifies the calculation of accounts receivable, inventory, and accounts payable balances for each month and for the quarter-ended period. As of the year ended December 31, 2011, the Smith-John balance sheet was as follows: Smith-John, Inc., Balance Sheet as of December 31, 2011 ASSETS Current Assets: Cash Marketable Securities Accounts Receivable Inventory Total current assets Fixed assets, net Total Assets $ $ 15,000 218,000 322,525 555,525 800,000 1,355,525 LIABILITIES & EQUITY Current Liabilities: Accounts payable $ Tax & interest payable Notes payable Total current liabilities Long-term debt Total liabilities 125,002 125,002 400,000 525,002 Equity: Common stock Retained earnings Total equity 400,000 430,523 830,523 Total Liab's & Equity $ 1,355,525 BUS303 - Business Finance - Comprehensive Problem - Module 2 This problem builds upon each of the different modules to a logical analysis and conclusion, emphasizing the most important aspects of business finance through the completion of each of the four modules. Following is a brief description of each of the modules and the course objectives that are covered with the module. Module One - this module will emphasize the student's grasp of the formation of financial statements and the development of analytical measures to assess the financial condition of the business firm. (CO 1.2, 2.1) Module Two - this module will focus upon the development of pro forma financial statements given various planning assumptions. (CO 1.4) Module Three - this module will require the student to apply working capital analysis techniques and assess the cost of debt to a business firm. (CO 2.2, 3.2, 3.3, 3.4) Module Four - this final module will encompass the application of time-value of money concepts to the business firm's decisions related to the firm's overall cost of capital. (CO 4.1, 4.4) General Guidelines: The proper, and professional, presentation of solutions associated with this comprehensive problem are part of the overall grading of each module. Because all analytic work is to be completed in Excel, but the solution submission is to be in Word, you must become familiar with importing schedules from Excel into Word in a professional manner. Please see the instructions contained in the Getting Started folder in Blackboard. Each module is due as indicated in the Learning Activities folder for the particular week and is to be uploaded into the Assignment as shown in the Grade Center. Sales: 235 per 1000 (widgets). Module Two - 56 points Smith-John makes standard sized widgets for the frazzle industry. These widgets are sold for $235 per thousand. Mr. Smith and Mr. John are asking you to assist with preparations for a meeting with their banker to arrange for financing the company for possible expansion. Based on a sales forecast (below) and other data, Mr. Smith and Mr. John would like you to prepare a monthly cash budget, monthly and quarterly pro forma income statements, a pro forma quarterly balance sheet, and all necessary supporting schedules for the first quarter of 2012. Sales forecast (in units): Sales - units Sales - $'s January 2,150,000 $ 505,250 February 2,350,000 $ 552,250 March 1,950,000 $ 458,250 April 1,750,000 $ 411,250 May 2,150,000 $ 505,250 Prior history shows that the company collects 75% of the sales in the first month after the sale, 20% in the second month after the sale, and the remainder in the third month after the sale. The company pays for materials purchased for production the month after receipt. In general, Mr. Smith and Mr. John like to keep 1.5 months supply of inventory on-hand at month-end in anticipation of sales. Inventory at the beginning of December was 2,400,000 units. (This was not equal to the desired inventory level of the desired 1.5 months supply.) Additionally, the unit sales for October, November and December were 1,900,000, 1,850,000 and 1,325,000, respectively. The major cost of production is the purchase of raw materials in the form of steel rods, which are cut, threaded, and finished. Last year raw material costs were $63 per 1,000 widgets, but Mr. John was notified by the purchasing department that the cost was going to rise to $68 per 1,000 widgets. The company uses FIFO inventory accounting and the purchases for materials are paid for in the month following the purchase. Labor costs are relatively constant at $22 per thousand widgets, since workers are paid on a piecework basis. Overhead is allocated at $12 per thousand widgets and selling and administrative costs are constant at 28% of sales revenue. Labor expense and overhead are direct cash outflows paid in the month incurred, while interest and taxes are paid quarterly. In addition, the company maintains a dividend payout ratio of 40% which is paid quarterly. The company usually maintains a minimum cash balance of $45,000, borrows notes payable if needed, and puts any excess cash into marketable securities. The average tax rate is 30%. Marketable securities are sold before funds are borrowed when a cash shortage is faced. Ignore the interest on short-term borrowings. Interest on the long- term bonds of $9,000 is paid in March, but is allocated over each month for accounting purposes. Taxes are paid in March, but are allocated over each month for accounting purposes. The Dividend payment is made at the end of March. In addition, the company is projecting the purchase of a new piece of manufacturing equipment in March for $50,000 that will be cash on delivery. Required - part 1: Prepare a monthly pro forma income statement and cash budget, and a quarter-ended income statement; make sure to include a sales forecast, production schedule, schedule of cost of goods sold, schedule of cash receipts, schedule of cash payments, net cash flow schedule, and the cash budget. All supporting schedules should include all three months of the quarter. s-vc= cm Required - part 2: Based on the date prepared in part 1, prepare a balance sheet as of the quarter-ended date. Make sure to include a schedule that identifies the calculation of accounts receivable, inventory, and accounts payable balances for each month and for the quarter-ended period. As of the year ended December 31, 2011, the Smith-John balance sheet was as follows: Smith-John, Inc., Balance Sheet as of December 31, 2011 ASSETS Current Assets: Cash Marketable Securities Accounts Receivable Inventory Total current assets Fixed assets, net Total Assets $ $ 15,000 218,000 322,525 555,525 800,000 1,355,525 LIABILITIES & EQUITY Current Liabilities: Accounts payable $ Tax & interest payable Notes payable Total current liabilities Long-term debt Total liabilities 125,002 125,002 400,000 525,002 Equity: Common stock Retained earnings Total equity 400,000 430,523 830,523 Total Liab's & Equity $ 1,355,525