PREPARE: A comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2020 - June 30, 2020 for Hedron, Inc. fictional company. Record your answers on the tables provided. Answers may only be recorded in the yellow/red blanks.

INFORMATION: HEDRON, INC. ANNUAL BUDGET

1. Hedron, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Hedron, so Hedron has no manufacturing-related costs.
2. As of 11/01/2019, each lawn chair costs Hedron $4 per unit. Hedron sells each chair for $10 per unit.
3. The estimated sales (in units) are as follows:

Nov 2019	11,250
Dec 2019	11,600
Jan. 2020	10,000
Feb. 2020	11,400
Mar. 2020	12,000
Apr. 2020	15,600
May 2020	18,000
June 2020	22,000
July 2020	18,000

4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2020. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2020. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2020. The sales forecast (i.e., estimated sales in units) takes this price increase into account.

5. Thirty percent of any months sales are for cash, and the remaining 70% are on credit. Thirty percent of the credit sales are collected in the month of sale, 50% are collected in the following month, and 16% are collected in the second month after the sale. The remaining receivables are deemed uncollectible. Bad debts are written off in the month the debt is deemed uncollectible (e.g. if the sale is made in January and is not collected by the end of March, it is written off in March.) No accrual for estimated bad debts is made in the month of sale.

6. The firms policy regarding inventory is to stock (i.e. have in ending inventory) 40% of the forecasted demand in units (i.e., estimated sales) for the next month. Hedron uses the first-in, first-out (FIFO) method in accounting for inventories.

7. Forty percent of the inventory purchases are paid for in the month of purchase and the remaining 60% are paid in the following month (i.e. all the previous months Accounts Payable are paid off by the end of any month.)

8. Per a prior contract, a cash payment of $50,000 for equipment previously purchased is due in January. Another payment of $30,000 is due in February. Depreciation on the equipment previously purchased is included in the overhead cost detailed in item 11 below. Also, dividends of $12,000 are to be paid in March.

9. Monthly operating expenses consist of the following (if these are cash expenses, they are paid when incurred):

Salaries and Wages	$3,000
Sales Commissions	7% of sales revenue
Rent	$8,000
Other Variable Cash Expenses	6% of sales revenue
Supplies Expense: See note (1)	$2,000
Other: See note (2)	$48,000

Note: 1. Hedron maintains, on hand, one months worth of supplies.

2. Other general and administrative overhead is expected to be $48,000 per month.

Of this amount, $24,000 represents depreciation and other non-cash expenses

10. The company must maintain a minimum cash balance of $15,000. Borrowing can make up shortfalls. For simplicity, assume that the bank will only lend (and accept repayments) in $1,000 increments. Ignore interest on the loan in your calculations, but minimize the amount borrowed and pay off any loans as soon as possible.

11. Cash on hand as of December 31, 2019 is expected to be $15,000. In addition, there will be no notes payable as of this date.
12. See below the other Balance Sheet accounts with their balances as of December 31, 2019:
    • Supplies..............................................$ 2,000
    • Property, Plant and Equipment.......... 970,000
    • Accumulated Depreciation................. 526,475
    • Common Stock................................... 200,000

• • Retained Earnings.............................. 322,811

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Cash Receipts Budget

Total Cash Receipts, January: $104,200

Total Cash Receipts, Jan June: $842,847

Uncollectible, January: $ 3,150

Uncollectible, Jan June: $ 20,118

Purchase Budget

Total Purchases, Jan June: $391,200

Cash Budget

Total Cash Disbursements, Jan June: $799,726

Ending Cash Balance, June: $ 58,121

Budgeted Income Statement

Operating Expenses, Total: $508,318

Net Income, Total: $ 56,234

Budgeted Balance Sheet

Total Assets: $621,023

Hedron, Inc. Sales Budget For the 6 mes ending June 20 Nov '19 11,250 10.00 $ 112,500 5 S 5 Dec 19 11,600 10 00 5 115.000 5 Jan 20 10,000 10.00 S 100,000 S Feb 20 Mar 20 11.400 12,000 10.00 $ 10.00 $ 114,000S 12.000 Apr 20 15,600 10.00 S 156,000 5 May 20 June 20 6 mos total 18,000 22,000 111,850 11.25 $ 11 25 202,500 5 247 500 S 1,168,500 30% 70% 5 6 7 8 Budged unt sales 9 Selling price per unit 10 Total Sales 11 12 Cash Sales % 13 Credit Sales % 14 15 Cash Sales 16 Credit Sales 17 Total Sales 18 19 20 Current month AVR Collections 21 1 month prior AVR Collections 22 2 months prior NR Collections 23 Uncollectible 24 5 33.7505 78.750 112,500 5 34,8005 81,200 116,000 5 30.000 70.000 100.000 S 34 2005 79,800 114 000 $ 36,000 S 84.000 120 000 $ 46, 800S 109,200 156,000S 60,7605 74 2505 350 550 141.750 173.250 817,950 202 500S 247 500S 1.160.500 S 50% 4% B H Hedron, Inc Cash Collections For the 6 mos ending June 20 24 25 26 27 28 29 30 Current month cash Sales 31 Current month AVR Collections 32 1 month prior AVR Collections 33 2 months prior AVR Collections 34 Total cash collections 35 36 Bad Debt Expense 37 38 Desired ending inventory % 39 Jan 20 30,000 21,000 35,000 11,200 97.2005 Feb 20 Mar 20 34,200 36,000 23,940 25 200 39,900 42,000 12,768 13,440 110,808 5 116,6405 Apx 20 May 20 46,800 60,750 32,760 42,525 54 600 70,875 17,472 22,680 151,6325 196,830$ June 20 6 mos total 74,250 5 350,550 51,975$ 245,385 86,625 $ 408,975 27 720 S 130 872 240,5705 1,135,782 $ 2,800 3,192 3,360 4,368 5,670 6,930 32,718 40% Hedron, Inc Purchase Budget For the 6 mos ending June 20 39 40 41 42 43 44 45 Budged unit sales 46 Add desired ending inventory 47 Total needs 48 Less Beginning Inventory 49 Required Purchases 50 51 Cost per unit 52 Purchases 53 54 % Paid in Month of Purchase 55 % Paid in Month after Purchase 26 Nov 19 11 250 4640 15,890 Dec 19 11 500 4.000 15,600 4.640 10,960 Jan 20 10,000 4,560 14,560 4.000 10,560 Feb 20 11 400 4,800 16,200 4.560 11,640 Mar 20 12 000 6240 18.240 4.800 13.440 Apr 20 15 600 7,200 22 800 6.240 16,560 May 20 18.000 8,800 25,800 7.200 19 600 June 20 22.000 7,200 29 200 8 800 20.400 6 mos to 111,850 47 440 159,290 40 240 103.160 4.00 $ 43.8405 4.00 $ 42 240S 4.00 46,560S 4.20 S 56,4485 4.20 5 69.5525 4415 4.41 86,436 S 89.964 435 040 40% 60% B66 1x & lx D Hedron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June 20 $ Jan 20 16,896 S 26,304 43,200 $ Feb 20 Mar 20 18,624 $ 22,579S 25,34 27,936 43,9685 50,5155 A 56 57 58 59 60 61 62 63 Cash purchases 64 1 month prior NP Collections 65 Cash disbursements for merchandise purch 66 67 68 69 70 71 Fixed Operating expenses 72 Salaries and Wages 73 Rent 74 Supplies Expense 75 Other - Overhead 76 Other - Depreciation 77 Apr 20 May 20 27,8215 34,574 S 33 869 41,731 61.6905 76,305 S June 20 6 mos total 35,986 5 156,480 51 862 207 046 87 8485 363,526 $ Variable Operating Expenses Sales Commissions, % of Revenue Other Variable Cash Expenses, % of Revenue Hedron, Inc. Operating Expense Budget For the 6 mos ending June 20 Jan 20 Feb 20 Mar 20 Apr 20 May 20 June 20 6 mos total T7 78 79 80 81 82 83 Salaries and Wages 84 Sales Commissions 85 Rent 86 Other Variable Cash Expenses 87 Supplies Expense 88 Other - Overhead 89 Other - Depreciation 90 Bad Debt Expense 91 Total operating expenses 92 Depreciation and noncash items 93 Bad Debt Expense 94 Cash disbursements for operating expenses 95 96 Equipment payment - January 97 Equipment payment - February 98 Dividends - March 99 Minimum Monthly Cash Budget 40 Hedion, Inc. Cash Budget For the 6 mos ending June 20 Jan 20 Feb 20 Mar 20 Apr 20 May 20 June 20 6 mos total 100 101 102 103 104 105 106 Cash balance, beginning 107 Add collections from customers 108 Total cash available 109 Less disbursements: 110 Cash disbursements for merchandise purch 111 Cash disbursements for operating expenses 112 Equipment purchases 113 Dividends 114 Total cash disbursements 115 Excess of receipts over disbursements 116 Financing 117 Borrowing.note 118 Repayments-note 119 Total financing 120 Cash balance, ending 121 122 123 124 Hedron, Inc. Budgeted Income Statement For the 6 mos ending June 20 125 Jan 20 Feb 20 Mar 20 Apr 20 May 20 June 20 Total 126 127 128 Sales, net 129 Cost of goods sold: 130 Gross margin 131 Total operating expenses 132 Net Income 133 133 134 Hedron, Inc. 135 Budgeted Balance Sheet 136 6/30/2020 137 138 Assets 139 Current Assets: 140 Cash 141 Accounts receivable 142 Supplies 143 Merchandise Inventory 144 Plant and Equipment: 145 Buildings and Equipment 146 Accumulated Depreciation 147 Total assets 148 149 Liabilities and Equity 150 Accounts payable 151 Capital stock 152 Retained earnings 153 Total liabilities and equity 154 B D E F G H FIFO Calculation 2 3 4 Beg Inventory Beg Inventory Units Purchases - Units COGS Units Ending Inventory Ending Inventory - Units Purchases COGS 5 6 8 9 10 11 Jan Feb Mar Apr May Jun