*Problem 5-35

Bonita Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firms marketing director, has completed the following sales forecast.

Month Sales Month Sales

January $904,300 July $1,503,900

February $1,002,600 August $1,503,900

March $904,300 September $1,610,000

April $1,158,500 October $1,610,000

May $1,254,900 November $1,503,900

June $1,405,100 December $1,700,100

Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information.

? All sales are made on credit.

? Bonitas excellent record in accounts receivable collection is expected to continue, with 60% of billings collected in the month after sale and the remaining 40% collected two months after the sale.

? Cost of goods sold, Bonitas largest expense, is estimated to equal 40% of sales dollars. Seventy percent of inventory is purchased one month prior to sale and 30% during the month of sale. For example, in April, 30% of April cost of goods sold is purchased and 70% of May cost of goods sold is purchased.

? All purchases are made on account. Historically, 75% of accounts payable have been paid during the month of purchase, and the remaining 25% in the month following purchase.

? Hourly wages and fringe benefits, estimated at 30% of the current months sales, are paid in the month incurred.

? General and administrative expenses are projected to be $1,560,800 for the year. A breakdown of the expenses follows. All expenditures are paid monthly throughout the year, with the exception of property taxes, which are paid in four equal installments at the end of each quarter.

Salaries and fringe benefits $ 325,500

Advertising 378,900

Property taxes 137,400

Insurance 193,900

Utilities 178,300

Depreciation 346,800

Total $ 1,560,800

? Operating income for the first quarter of the coming year is projected to be $324,300. Bonita is subject to a 40% tax rate. The company pays 100% of its estimated taxes in the month following the end of each quarter.

? Bonita maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12% line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $59,200.

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Prepare the cash receipts budget for the second quarter. (Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.)

Cash Receipts Budget

April May June Total Cash Receipts

February sales $

$

$

$

March sales

April sales

May sales

Totals $

$

$

$

Accounts Receivable balance at the end of second quarter of 2015 $

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Prepare the purchases budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.)

Purchases Budget

April May June Total Purchases

April COGS $

$

$

$

May COGS

June COGS

July COGS

Totals $

$

$

$

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Prepare the cash payments budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.)

Cash Payments Budget

April May June

March purchases $

$

$

April purchases

May purchases

June purchases

$

$

$

Accounts Payable balance at the end of second quarter of 2015 $

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Prepare the cash budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.)

Cash Budget

April May June Quarter

Beginning Cash balance $

$

$

$

Financing:

Ending Cash Balance $

$

$

$

**Need help preparing the cash budget for the next quarter. I'm not sure how to calculate the numbers.