Problem 5-35 Bonita Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm's marketing director, has completed the following sales forecast Sales Month Sales Month $905,500 $1,503,000 January July February $1,002,600 August $1,503,000 March $905,500 September $1,606,300 April $1,159,300 October $1,606,300 May $1,258,900 November $1,503,000 June $1,406,000 December $1,706,700 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. Bonita's 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, Bonita's 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 month's sales, are paid in the month incurred General and administrative expenses are projected to be $1,576,100 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 326,500 Advertising 376,000 Property taxes 143,000 Insurance 198,400 Utilities 181,800 350,400 Depreciation $1,576,100 Total Operating income for the first quarter of the coming year is projected to be $326,200. 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. Cash Budget May April June Quarter 59200 50024 50307 $ Beginning Cash balance 59200 $ Collection from Sales 944340 1057780 1219060 3221180 Total cash available to spend 1269367 1107804 1003540 3280380 Less: disbursements 81624 27208 27208 Salaries 27208 Advertising 31333 31333 31333 93999 Property taxes 35750 35750 16533 Insurance 16533 16533 49599 15150 Utilities 15150 15150 45450 Payments for inventory 477022 531463 578357 1586842 130480 Income taxes 130480 Cash excess (deficiency) -41976 143236 109376 108447 50000 50000 50000 Minimum cash balance 50000 Cash excess (needed) 93236 59376 91976 58447 Financing: 92000 Borrowings 92000 x -92000 -57000 Repayments -35000 -2190 -1050 Interest -1140 Total financing -2190 92000 -58140 -36050 x 107186 107186 50024 50307 Ending Cash Balance Modify Show Work Click if you would like to Show Work for this question: xP