Medieval Adventures Company<\/p>
Medieval Adventures Company was founded by Aaron Reinholz to produce a game marketed<\/p>
under the name Castles and Unicorns. Each Castles and Unicorns company the $35 to<\/p>
produce. In addition to these production costs that varied in direct proportion to volume (socalled variable costs), the company also incurred $10000 monthly being in the<\/p>
businesscosts(so-called fixed costs)irrespective of the months volume for $55 each.<\/p>
As of December 31, Reinholz had been producing Castles and Unicorns for the three months<\/p>
using rented facilities. The balance sheet on that was as follows:<\/p>
Medieval Adventures Company<\/p>
Balance Sheet<\/p>
As of December 31<\/p>
Asset<\/p>
Cash..$146250<\/p>
Accounts receivable 68750<\/p>
Inventory. 35000<\/p>
250000<\/p>
Equities<\/p>
Common Stock$250000<\/p>
Retained earnings 0<\/p>
250000<\/p>
Reinholz was very pleased to be operating at a profit in such a short time. December sales had<\/p>
been 750 units, up from 500 in November, enough to report a profit for the month and to<\/p>
eliminate the deficit accumulated in October and November. Sales were expected to be 1000<\/p>
units in January, and Reinholz projections showed sales increases of 500 units per month after<\/p>
that. Thus, by May monthly sales were exected to be 3000 units. By September that figure would<\/p>
be 5000 units<\/p>
Reinholz was very conscious of developing good sales channel relationships in order to increase<\/p>
sales, so Castles and Unicorns deliveries were always prompt. This required production<\/p>
schedules 30days in advance of predicted sales. For example 1000 Castles and Unicorns in<\/p>
December for January sales, and would produce 1500 in January for Februarys demand. The<\/p>
company billed its customers with stated terms of 30 days net, but did not strictly enforce these<\/p>
credit terms with the result that customers seemed to be taking an additional month to pay. All of<\/p>
the companys costs were paid in cash in the month in which they were incurred.<\/p>
Reinholzs predictions came true. By March, sales had reached 2000 Castles and Unicorns, and<\/p>
2500 units were produced in March for April sale. Total profit for the year by March 31 had<\/p>
reached $60000. In order to get a respite from the increasingly hectic activities of running the<\/p>
business, in mid-April Reinholz went on a family vacation.<\/p>
Within the week the companys book keeper called. Medieval Adventuresbank balance was<\/p>
almost zero, so necessary materials could not be purchased. Unless Reinholz returned<\/p>
immediately to raise more cash, the entire operation would have to shut down within a few days.<\/p>
Question<\/p>
1. Prepare monthly income statement, balance sheets, and cash budgets based on sales increases of 500 units per month and 30-day advance production for January through<\/p>
September. When will the company need extra finds? How much will be needed? When<\/p>
can a short-term loan to cover the need to repair?<\/p>
2. How is it possible that a company starts with $25000 in capital and has profitable sales<\/p>
for a period of six months and still ends up with a zero bank balance? Why did Medieval<\/p>
Adventures need money in April? How could this need have been avoided?<\/p>
3. From your calculations and financial statements for Question 1, derive cash flow<\/p>
statemens for the months of March, May, and July from each months beginning and<\/p>
ending balance sheets and income statement. Compare these derived cash flow statements<\/p>
with the cash budgets prepared directly in Question 1.<\/p>
4.<\/p>", "transcribed_text": "", "related_book": { "title": "Income Tax Fundamentals 2013", "isbn": "1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516", "edition": "31st Edition", "authors": "Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1124.jpg", "uri": "\/textbooks\/income-tax-fundamentals-2013-31st-edition-9781285586618", "see_more_uri": "" }, "free_related_book": { "isbn": "0740115448", "uri": "\/textbooks\/vermont-in-perspective-2005-1st-edition-978-0740115448-287364", "name": "Vermont In Perspective 2005", "edition": "1st Edition" }, "question_posted": "2024-06-28 07:31:09", "see_more_questions_link": "\/study-help\/questions\/business-banking-2021-September-12", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/list-the-key-internal-control-weaknesses-that-were-evident-in", "description": "List the key internal control weaknesses that were evident in the Huntington units operations.", "stars": 3 }, { "url": "\/study-help\/business-statistics-in-practice\/a-explain-why-this-does-not-necessarily-prove-that-the-1982214", "description": "=+a) Explain why this does not necessarily prove that the special course caused the scores to go up.", "stars": 3 }, { "url": "\/create-a-decision-tree-for-problem-12", "description": "Create a decision tree for Problem 12.", "stars": 3.5 }, { "url": "\/study-help\/questions\/question-21-marked-out-of-20-the-role-of-the-9871176", "description": "Question 21 Marked out of 2.0 The role of the International Sustainability Standards Board (ISSB) is to a. To develop standards that address the need for more consistent, complete, comparable and...", "stars": 3.5 }, { "url": "\/study-help\/questions\/compare-and-contrast-the-three-main-types-of-research-methods-1487259", "description": "Compare and contrast the three main types of research methods used by cross-cultural psychologists: method validation, indigenous cultural studies, and cross-cultural comparisons. Share an example of...", "stars": 3.5 }, { "url": "\/study-help\/questions\/excel-caculation-on-cascade-mental-health-clinic-5534884", "description": "Excel caculation on cascade mental health clinic", "stars": 3.5 }, { "url": "\/study-help\/questions\/linear-approximation-and-differentials-1-point-estimate-af-using-the-1005270", "description": "Linear Approximation and Differentials: (1 point) Estimate Af using the Linear Approximation and use a calculator to compute both the e f(x) = 3+x. Af a = 1. Ax=1 With these calculations, we have...", "stars": 3.5 }, { "url": "\/study-help\/questions\/a-business-should-invest-in-information-security-to-protect-their-999643", "description": "A business should invest in information security to protect their sensitive data, and maintain customer trust, and also because of information security the business avoids financial losses due to...", "stars": 3.5 }, { "url": "\/study-help\/questions\/the-system-shown-in-fig-22-consists-of-a-rope-1024060", "description": "The system shown in Fig. 2.2 consists of a rope of initial length L under tension T and subjected to a transverse force f(x) (Figure 2.2). T w(x) T L f(x) Figure 2.2 Assuming that the deflection w(x)...", "stars": 3.5 }, { "url": "\/study-help\/questions\/create-a-process-flowchart-for-any-process-that-you-complete-1008012", "description": "Create a process flowchart for any process that you complete either at work or in your personal life explaining your flowchart and your thinking. Any issues you found? Areas for change? Also, include...", "stars": 3.5 } ], "next_back_navigation": { "previous": "\/study-help\/questions\/eib-wings-r-us-is-considering-the-purchase-4263750", "next": "\/study-help\/questions\/acquiring-an-equipment-at-300000-means-selling-stock-valued-at-4263752" }, "breadcrumbs": [ { "name": "Study help", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers" }, { "name": "Business", "link": "https:\/\/www.solutioninn.com\/study-help\/questions-and-answers\/business" }, { "name": "Accounting", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/business-accounting" }, { "name": "Medieval Adventures Company Medieval Adventures Company was founded by Aaron Reinholz to", "link": "https:\/\/www.solutioninn.com\/study-help\/questions\/medieval-adventures-company-medieval-adventures-company-was-founded-by-aaron-4263751" } ], "skill_details": { "skill_id": "9", "skill_name": "Accounting", "parent_id": "1" } }d": "1" } }