Question
Ponpon produces cans of jelly. The company would like to purchase a canning machine. The machine costs $25,000 and the company needs a loan to
Ponpon produces cans of jelly. The company would like to purchase a canning machine. The machine costs $25,000 and the company needs a loan to make the purchase. Before agreeing to the loan, their bank requires Ponpon to provide both current (2020) and budgeted (3 months in 2021) financial statements.
Use the following information from Ponpon to provide the bankers with the 2021 budgeted financial states.
Balance Sheet
Cash $50,000
Accounts Receivable $31,000
Inventory $12,000
Fixed Assets $37,000
Total Assets $130,000
Accounts Payable $22,500
Accrued Credit Fees $9,200
Common Stock $46,800
Retained Earnings $$51,500
Total Liabilities & Equity $130,000
2021 Sales Forecast
January $74,000
February $82,000
March $58,000
April $54,000
May $80,000
June $67,000
July $70,500
Additional Info:
- Ponpon only accepts credit cards when selling their jelly. Ponpon collects 35% of the sales on account in the month of the sale and 65% in the month after the sale.
- Unfortunately, the credit card companies pass along a 6.2% sales fee to Ponpon for the convenience and safety of their transactions on account. The sales fee is due one month after the sale.
- The cost of sales is 42% of (current month) sales.
- Ponpon maintains an inventory at all times at the sales requirements (COS) for the months budgeted sales. This provides assurance that they wont run out of jelly.
- Ponpon uses a credit card for all their purchases. The company pays off their credit card balance in full the following month.
- Ponpon pays 5% of sales each month to Jako Co. for the CEOs security service.
- In addition to the carriable security cost, Ponpon incurs fixed expenses of $22,000 per month, $1500 of which is for depreciation of fixed assets.
1. Complete the budget spreadsheet for Ponpon
Cash Budget
January February March April May
Beginning Balance:
Plus, cash receipts from sales:
Cash from Dec Sales
Cash from Jan Sales $74,000
Cash from Feb Sales $82,000
Cash from Mar Sales $58,000
Cash from Apr Sales $54,000
Cash from May Sales $80,000
Cash from Jun Sales $67,000
Plus: Total Cash Receipts
Cash Expenditures
Inventory Purchases
Variable Costs (mgmt. fee)
Credit Card Fees
Fixed Expenses
Total Cash Expenditures
Ending Cash Balance
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