Question 1

Chloe Company makes specially designed coffee machine. The entity has developed its web page and is trying to switch customer behavior to this form of medium since pandemic started in 2020. They expect this will assist them in boosting their sales and survive from the downturn caused by the pandemic. Sales for each quarter of 2020 were as follows.

Quarter ending

31 March $ 2,170,000

30 June $2,140,000

30 September $2,155,000

31 December $3,010,000

Due to the change in sales strategy, the marketing department at Chloe Company expects the sales for 2021 to grow by 20% in the first and second quarter and 30% in the following quarters compared to 2020. The unit sales price will be the same as 2020, at $2,000 per unit. Sales in the December quarter of 2020 were $500,000. All sales are on credit, of which 60% are collected in the quarter of sale and 40% in the following quarter. Purchases are on credit, and entity policy is such that all purchases are paid for in the same quarter. The marketing and administration expenses incurred and paid are the same. Operational expenses incurred and paid are usually the same for each quarter. A major IT hardware acquisition to be paid for in cash, is expected in the December quarter. The bank balance on 31 December 2020 was $18,000.

Chloe Company has presented the following estimates relating to 2021 activities:

Quarter ending 31-Mar 30-Jun 30-Sep 31-Dec Purchases 1,050,000 1,750,000 1,850,000 2,450,000 Cost of sales 300,000 350,000 400,000 425,000 Marketing and administration expenses 700,000 550,000 550,000 700,000 68,000 Operational expenses Depreciation 12,500 12,500 12,500 12,500 expense 68,000 68,000 68,000