Please solve for answers with RED X in image Required 2 c-e, use 365 days in a year. Please solve for equity multiplier in Required 3 b. THE BALANCE SHEET IS CORRECT. I VERIFIED IT WITH THE SOFTWARE'S CHECK MY WORK PROBLEM. PLEASE SOLVE.
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Required information [The following information applies to the questions displayed below.) 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: $ 46,200 260,000 11,250 32,250 $349,700 Endless Mountain Company Balance Sheet December 31, 2016 Assets Current assets: Cash Accounts receivable (net) Raw materials inventory (4,500 yards) Finished goods inventory (1,500 units) Total current assets Plant and equipment: Buildings and equipment Accumulated depreciation Plant and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 900,000 (292,000) 608,000 $957,700 $158,000 $ 419,800 379,900 799,700 $957,700 The company's 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: 1. 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. 2. 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. 3. Each quarter's ending finished goods inventory should equal 15% of the next quarter's unit sales. 4. Each unit of finished goods requires 3.5 yards of raw material that costs $3.00 per yard. Each quarter's ending raw materials inventory should equal 10% of the next quarter's production needs. The estimated ending raw materials inventory on December 31, 2017 is 5,000 yards. 5. Seventy percent of each quarter's purchases are paid for in the quarter of purchase. The remaining 30% of each quarter's purchases are paid in the following quarter. 6. 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. 7. 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. 8. 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. 9. 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 company's lender imposes a simple interest rate of 3% per quarter on any borrowings. 10. Dividends of $15,000 will be declared and paid in each quarter. 11. 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: 1. To help assess the company's liquidity, calculate the following at December 31, 2017: a. Working capital b. Current ratio IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII 2. To help assess the company's asset management, calculate the following for 2017: a. Accounts receivable turnover b. Average collection period c. Inventory turnover d. Average sale period e. Operating cycle 3. To help assess the company's debt management, calculate the following for 2017: a. Times interest earned ratio b. Equity multiplier 4. To help assess the company's profitability, calculate the following for 2017: a. Net profit margin percentage b. Return on equity 5. For each of the measures and ratios that you computed in requirements 1 through 4, indicate whether, generally speaking, management would prefer to see it increase or decrease over time. a. Accounts receivable turnover Average collection period Inventory turnover Average sale period Operating cycle 12.38 29.48 days 53.58 X 6.81 X days 36.29X days e. To help assess the company's debt management, calculate the following for 2017: a. Times interest earned ratio b. Equity multiplier (Round your answer to 2 decimal places.) Times interest earned ratio Equity multiplier 28.00 1.07 Prepare the quarterly sales budget including a schedule of expected cash collections. Endless Mountain Company Sales Budget For the Year Ended December 31, 2017 Quarter 1 2 3 12,000 37,000 15,000 32 $ 32 $ 32 $ 384,000 184000 $ 480,000 Budgeted unit sales Selling price per unit 4 25,000 $ 32 $ 800,000 Year 89,000 32 $ Sales 2,848,000 Schedule of Expected Cash Collections Beginning accounts receivable First-quarter sales Second-quarter sales $ 260,000 288,000 96,000 888,000 296,000 360,000 $ 260,000 384,000 1,184,000 480,000 600,000 Third-quarter sales Fourth-quarter sales 120,000 600,000 $ 720,000 Total cash collections $ 548,000 $ 984,000 $ 656,000 2,908,000 Endless Mountain Company Production Budget For the Year Ended December 31, 2017 Quarter Year 89,000 37,000 15,000 Budgeted unit sales Add desired units of ending finished goods inventory Total needs 12,000 5,550 25,000 1,950 3,750 1,950 90,950 2,250 39,250 5,550 33,700 17,550 1,500 16,050 Less units of beginning finished goods inventory Required production in units 18,750 2,250 16,500 26,950 3,750 23,200 1,500 89,450 Endless Mountain Company Direct Materials Budget For the Year Ended December 31, 2017 Quarter 1 2 Required production in units 16,050 33,700 Quantity of raw materials needed per unit 3. 51 3.5 Quantity of raw materials needed to meet production 56,175 117,950 Add desired quantity of ending raw materials 11,795 5,775 inventory Total quantity of raw materials needed 67,970 123,725 Less quantity of beginning raw materials inventory 4,500 11,795 Quantity of raw materials to be purchased 63,470 111,930 Cost of raw materials per yard 3 $ 3 $ Cost of raw materials to be purchased $ 190,410 $ 335,790 $ 3 16,500 3.5 57,750 4 23,200 3.5 81,200 Year 89,450 3.5 313,075 8,120 65,870 5,775 60,095 3 180,285 5,000 86,200 8,120 78,080 3 234,240 5,000 318,075 4,500 313,575 3 940,725 $ 30 $ $ $ $ Schedule of Expected Cash Disbursements for Purchases of Materials Beginning accounts payable $ 158,000 First-quarter purchases 133,287 57,123 Second-quarter purchases 235,053 100,737 Third-quarter purchases 126,200 Fourth-quarter purchases Total cash disbursements for materials $ 291,287 $ 292,176 $ 226,937 $ 158,000 190,410 335,790 180,285 163,968 $ 1,028,453 54,086 163,968 218,054 $ Endless Mountain Company Direct Labor Budget For the Year Ended December 31, 2017 Quarter 1 2 3 16,0501 33,700 16,500 0.25 0.25 0.25 4,012.5 L 8,425.0 L 4,125.0 - 18 $ 18 $ 18 $ 72,225 $ 151,650 $ 74,250 Required production in units Direct labor-hours per unit Total direct labor-hours needed Direct labor cost per hour Total direct labor cost 4 23,200 0.25 5,800.0 18 104,400 Year 89,450 0.25 22,362.5 18 402,525 $ $ $ $ Endless Mountain Company Manufacturing Overhead Budget For the Year Ended December 31, 2017 Quarter 1 2 3 4 Year Budgeted direct labor hours 4,012.5 8,425.0 4,125.0 5,800.0 22,362.5 Variable manufacturing overhead per direct labor- - 3$ 30$ 30$ 30$ 39 hour Variable manufacturing overhead $ 12,038 $ 25,275 $ 12,375 $ 17,400 $ 67,088 Fixed manufacturing overhead 150,000 150,000 150,000 150,000 600,000 Total manufacturing overhead 162,038 175,275 162,375 167,400 667,088 Less depreciation 20,000 20,000 20,000 20,000 80,000 Cash disbursements for manufacturing overhead 142,038 155,275 142,375 147,400 587,088 $ Total manufacturing overhead Budgeted direct labor hours Predetermined overhead rate for the year 667,088 22,362.5 29.83 $ Endless Mountain Company Ending Finished Goods Inventory Budget (absorption costing basis) For the Year Ended December 31, 2017 Quantity Cost Item Total Production cost per unit: . . . . . . . Direct materials Direct labor 3.50 0.25 0.25 yards hours hours $ 3.00 $ 18.00 $ 29.83 . yard per hour per hour 10.50 4.50 7.46 22.46 Manufacturing overhead Unit product cost $ Budgeted finished goods inventory: Units from prior year's production Unit product cost Cost from prior year's production $ $ 1,500 21.50 32,250 Units from current year's production Unit product cost Cost from current year's production 450 22.46 10,107 $ Cost of ending finished goods inventory $ 42,357 4 25,000 1.25 31,250 Year 89,000 1.25 111,250 $ $ $ $ Endless Mountain Company Selling and Administrative Expense Budget For the Year Ended December 31, 2017 Quarter 1 2 3 Budgeted unit sales 12,000 37,000 15,000 Variable selling and administrative expense per unit 1.25 $ 1.25 $ 1.25 Sales $ 15,000 $ 46,250 $ 18,750 Fixed selling and administrative expenses: Advertising 25,000 25,000 25,000 Executive salaries 64,000 64,000 64,000 Insurance 12,000 12,000 12,000 Property taxes 8,000 8,000 8,000 Depreciation 8,000 8,000 8,000 Total fixed selling and administrative expenses 117,000 117,000 117,000 Total selling and administrative expenses 132,000 163,250 135,750 Less depreciation 8,000 | 8,000 8,000 Cash disbursements for selling and administrative $ 124,000 $ 155,250 $ 127,750 expenses 25,000 64,000 12,000 8,000 8,000 117,000 148,250 8,000 $ 140,250 100,000 256,000 48,000 32,000 32,000 468,000 579,250 32,000 $ 547,250 Endless Mountain Company Cash Budget For the Year Ended December 31, 2017 Quarter 4 $ 314,338 Year $ 46,200 $ 46,200 $ 30,000 $ 244,649 Beginning cash balance Add cash receipts: Collection from customers Total cash available 548,000 594,200 984,000 1,014,000 656,000 900,649 720,000 1,034,338 2,908,000 2,954,200 Less cash disbursements: Direct materials Direct labor Manufacturing overhead Selling and administrative Dividends Total cash disbursements Excess or (deficiency) of cash available over disbursements Financing: Borrowings (at the beginnings of quarters) 291,287 72,225 142,038 124,000 15,000 644,550 292,176 151,650 155,275 155,250 15,000 769,351 226,937 74,250 142,375 127,750 15,000 586,312 218,054 104,400 147,400 140,250 15,000 625,104 1,028,454 402,525 587,088 547,250 60,000 2,625,317 (50,350) 244,649 3 14,337 409,234 328,883 Repayment (at end of the year) Interest (at 3% per quarter) Total financing Ending cash balance 80,350 0 0 0 80,350 30,000 0 0 0 0 $ 244,649 0 0 0 0 $ 314,337 80,350 9,642 89,992 $ 319,242 80,350 80,350 9,642 (9,642) $ 319,241 $ Endless Mountain Company Budgeted Income Statement For the Year Ended December 31, 2017 (Absorption costing basis) Sales $ 2,848,000 Cost of goods sold 1,998,724 Gross margin 849,276 Selling and administrative expenses 579,250 Net operating income 270,026 Interest expense (9,642) Net income $ 260,384 Endless Mountain Company Budgeted Balance Sheet December 31, 2017 Assets Current assets: Cash $ 319,243 Accounts receivable 200,000 Raw materials inventory 12,750 Finished goods inventory 42,356 $ 574,349 Total current assets Plant and equipment: Buildings and equipment Accumulated depreciation 900,000 (404,000) 496,000 $ 1,070,349 Plant and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Stockholders' equity: Common stock, no par 419,800 Retained earnings 580,284 $ 70,272 Total stockholders' equity Total liabilities and stockholders' equity 1,000,084 $ 1,070,356
