PART TWO Cash flow and Financing Before leaving, Joyce advised Royce that there is a need for better forecasting regarding the companys cash inflows and outflows After a series of questions, you determined that (1) the company had not prepared a cash budget for several quarters and (2) is not up to date on its payables and receivables You are going to prepare a forecasted income statement and a forecasted cash budget for the fourth quarter Pertinent information needed has been collected and is outlined below Pertinent Information The business manager accountant and Royce provided projections pertaining to the 2 nd quarter (April through June 2020) and other information outlined below Total sales 2 nd quarter 2,500 3 piece set Sales price is $900 3 piece set Total Sales for the 3 rd quarter are projected to increase 8 5 above the 2 nd quarter total sales due to an aggressive marketing program that began June 1, 2020 Total quarter sales per month are expected to be realized as follows 40 in July, 35 in August, and 25 in September The sales budgets expressed in sales dollars and in the number of furniture sets sold are as follows PROJECTED July August September TOTAL QTR SALES REVENUE SALES 8 5 increase) $610,313 $854,438 $976,500 $2,441,250 SALES PRICE X QUANTITY $610,313 $854,438 $976,500 $2,441,250 Number of Furniture Sets Sold July August September TOTAL QTR Number of Furniture Sets Sold 678 949 1,085 2,713 Monthly Sales are classified as follows and realized in corresponding percentage a Cash sales 35 of total sales b Credit sales 65 of total sales Cost Classifications based on 2 nd quarter 2020 information Costs Variable Costs Fixed Costs Raw Materials Used in Manufacturing (See corrected COGS Schedule in Part 1, Required 1) $ Actual 2 nd Quarter Income Statement Direct Labor 570,000 Overhead Rent Factory $ 250,000 Indirect Labor 84,000 Insurance Factory (66 2 3 ) 30,000 Utility Factory (50 ) 20,000 9,000 Depreciation factory building 91,000 General Administrative Advertising 270,000 Selling Administrative Wages and Salaries 90,000 135,000 Utility Selling Administrative (50 ) 20,000 9,000 Insurance Administrative (33 2 3 ) 15,000 Depreciation Administrative 135,000 All factory overhead and administrative expenses (except depreciation) are paid in cash in the month the cost is incurred Direct labor is paid at the end of the month Raw material purchases are paid as follows 60 in the month of the purchase, 20 the month after the purchase, and 20 in the second month following the purchase The raw materials budget is as follows PROJECTED July August September TOTAL QTR RAW MATERIAL PURCHASES NEEDED FOR SALES $186,349 $260,888 $298,158 $745,395 DESIRED ENDING 46,587 65,222 74,540 LESS BEGINNING (153,000) (46,587) (65,222) PURCHASES $79,936 $279,523 $307,475 $666,935 Additional monthly obligation paid in cash include Property taxes, due August 31, $2,950 Employee payroll taxes due September 30 , $3,000, You have determined that you are going to provide the following information to Joyce and Royce Compute the unit cost of goods sold using 2 nd quarter information and the corrected cost of goods sold statement you prepared in Part One Units cost of goods sold Cost of Goods Sold Statement Prepare a projected traditional multi step income statement for the 3 rd quarter using information in a, above and the 2 nd quarter information on the table in 5 above (see the previous page) For proper formatting, see Exhibit 1 at the end of this document Prepare a schedule of projected cash collections from credit sales for each month of the 3 rd quarter Relevant prior months credit sales May credit sales, $368,720 June credit sales, $331,840 Prepare a schedule of projected cash payments for raw materials for each month of the 3 rd quarter Relevant prior months credit (on account) purchases May purchases on account, $344,100 June purchases on account, $309,720 Prepare a projected cash budget for the total 3 rd quarter Your budget should include a monthly budget for each of the three months in the quarter The cash balance on July 1, 2020 is $1,270,000

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PART TWO Cash flow and Financing Before leaving, Joyce advised Royce that there is a need for better forecasting regarding the companys cash inflows and

PART TWO

Cash flow and Financing

Before leaving, Joyce advised Royce that there is a need for better forecasting regarding the companys cash inflows and outflows. After a series of questions, you determined that (1) the company had not prepared a cash budget for several quarters and (2) is not up to date on its payables and receivables. You are going to prepare a forecasted income statement and a forecasted cash budget for the fourth quarter. Pertinent information needed has been collected and is outlined below.

Pertinent Information:

The business manager/accountant and Royce provided projections pertaining to the 2^nd quarter (April through June 2020) and other information outlined below:

Total sales 2^nd quarter: 2,500 3-piece set; Sales price is $900/3-piece set

Total Sales for the 3^rd quarter are projected to increase 8.5% above the 2^nd quarter total sales due to an aggressive marketing program that began June 1, 2020. Total quarter sales per month are expected to be realized as follows: 40% in July, 35% in August, and 25% in September. The sales budgets expressed in sales dollars and in the number of furniture sets sold are as follows:

PROJECTED	July	August	September	TOTAL QTR
SALES REVENUE
SALES 8.5% increase)	$610,313	$854,438	$976,500	$2,441,250

SALES: PRICE X QUANTITY	$610,313	$854,438	$976,500	$2,441,250

Number of Furniture Sets Sold	July	August	September	TOTAL QTR

Number of Furniture Sets Sold	678	949	1,085	2,713

Monthly Sales are classified as follows and realized in corresponding percentage: a. Cash sales.35% of total sales b. Credit sales.65% of total sales
Cost Classifications based on 2^nd quarter 2020 information:

Costs	Variable Costs	Fixed Costs
Raw Materials Used in Manufacturing (See corrected COGS Schedule in Part 1, Required #1)	$ ?

Actual 2^nd Quarter Income Statement
Direct Labor	570,000
Overhead:
Rent-Factory		$ 250,000
Indirect Labor	84,000
Insurance Factory (66 2/3%)		30,000
Utility-Factory (50%)	20,000	9,000
Depreciation-factory building		91,000

General Administrative
Advertising		270,000
Selling & Administrative Wages and Salaries	90,000	135,000
Utility-Selling & Administrative (50%)	20,000	9,000
Insurance-Administrative (33 2/3%)		15,000
Depreciation-Administrative		135,000

All factory overhead and administrative expenses (except depreciation) are paid in cash in the month the cost is incurred.
Direct labor is paid at the end of the month
Raw material purchases are paid as follows: 60% in the month of the purchase, 20% the month after the purchase, and 20% in the second month following the purchase. The raw materials budget is as follows:

PROJECTED	July	August	September	TOTAL QTR
RAW MATERIAL PURCHASES

NEEDED FOR SALES	$186,349	$260,888	$298,158	$745,395
DESIRED ENDING	46,587	65,222	74,540
LESS: BEGINNING	(153,000)	(46,587)	(65,222)
PURCHASES	$79,936	$279,523	$307,475	$666,935

Additional monthly obligation paid in cash include:

Property taxes, due August 31, $2,950.
Employee payroll taxes due September 30 , $3,000,

You have determined that you are going to provide the following information to Joyce and Royce:

Compute the unit cost of goods sold using 2^nd quarter information and the corrected cost of goods sold statement you prepared in Part One
- Units cost of goods sold:

- Cost of Goods Sold Statement:
Prepare a projected traditional multi-step income statement for the 3^rd quarter using information in a, above and the 2^nd quarter information on the table in 5 above (see the previous page). For proper formatting, see Exhibit 1 at the end of this document.
Prepare a schedule of projected cash collections from credit sales for each month of the 3^rd quarter. Relevant prior months credit sales: May credit sales, $368,720 June credit sales, $331,840

Prepare a schedule of projected cash payments for raw materials for each month of the 3^rd quarter. Relevant prior months credit (on account) purchases: May purchases on account, $344,100 June purchases on account, $309,720

Prepare a projected cash budget for the total 3^rd quarter. Your budget should include a monthly budget for each of the three months in the quarter. The cash balance on July 1, 2020 is $1,270,000.