QUESTION 2: Final Corporation is getting ready to prepare its budgets for May. 1. Forecarted sales in units for March, April and May are as follows: March 2,000 unuts, April 4,000 units and May 5,000 unita The company's selling price is $10 per unit. 50% of a month's sales are collected in the sarne month, 40% in the following month and the remaining in the second mooth following the sales. 2. The company purchases its merthandise inventory monthly. Moothly purchases in units are equal to the applicable month's sales in uniti. Therefore, the company carries zero inventory. Purchase price per unit (also cost of goods sold per unit) is 50% of sales price per unit. 80%6 of the purchases are paid in the sume month and remaning balance is paid in the month following the month of the purchase: 3. The company has an irvestment in Treasury bends of $50,000 from which it eams monthly interest of $2,000. The T.bills will miture on Mry 31 and at this date, principal amouint plus necrued interest fors months will be recerved in full 4. Beginning eash is expected to be $10,000 co May 1 . 5. Dridends of \$12,000 will be declared and paid in May, 6. The compary bas a mosthly salanes expense of $30,000. The lalanes of each month are paid to the eriployees in the same moeth as incurred. 7. The coeapany will move to a nw office on April 1. A fent security deposit of 510,000 , and fint. month's rent of \$2,000 will be paid in April in addition, on May 1,56,000 will be paid at for the months of May, fine, ind July 9. On May 1, the company will pay 518,000 cath in advance for a 12 encath issuranct policy coverung the fixed asets of the cormpany. 9. All other cash operating expenses are estimated as $16,000 per month, to be paid in the sume month as incurred. 10. On May 1, the company will sell its old equipment for $30,000 cash (old equipment will have a net book value of $40,000 at that date). The company will buy a new equipment for $24,000 cash on May 1. The company uses the straight-line method of depreciation with a useful life of 10 years. 11. The company has a bank loan outstanding which was taken in 2020, in order to start the businese. Principal payments of $10,000 and interest payments of $600 are paid every month. Required: Prepare the following budgets for MAY: a) Sales budget b) Schedule of expected cash collections from sales c) Inventory purchases budget d) Schedule of expected cash payments for inventory purchases e) Cash budget 1) Budgeted income statement PRESENT VALUE TABLES Table 1: Discount rate (r) Table 2: Present Value of an Annuity of $1 in Arrears QUESTION 2: Final Corporation is getting ready to prepare its budgets for May. 1. Forecarted sales in units for March, April and May are as follows: March 2,000 unuts, April 4,000 units and May 5,000 unita The company's selling price is $10 per unit. 50% of a month's sales are collected in the sarne month, 40% in the following month and the remaining in the second mooth following the sales. 2. The company purchases its merthandise inventory monthly. Moothly purchases in units are equal to the applicable month's sales in uniti. Therefore, the company carries zero inventory. Purchase price per unit (also cost of goods sold per unit) is 50% of sales price per unit. 80%6 of the purchases are paid in the sume month and remaning balance is paid in the month following the month of the purchase: 3. The company has an irvestment in Treasury bends of $50,000 from which it eams monthly interest of $2,000. The T.bills will miture on Mry 31 and at this date, principal amouint plus necrued interest fors months will be recerved in full 4. Beginning eash is expected to be $10,000 co May 1 . 5. Dridends of \$12,000 will be declared and paid in May, 6. The compary bas a mosthly salanes expense of $30,000. The lalanes of each month are paid to the eriployees in the same moeth as incurred. 7. The coeapany will move to a nw office on April 1. A fent security deposit of 510,000 , and fint. month's rent of \$2,000 will be paid in April in addition, on May 1,56,000 will be paid at for the months of May, fine, ind July 9. On May 1, the company will pay 518,000 cath in advance for a 12 encath issuranct policy coverung the fixed asets of the cormpany. 9. All other cash operating expenses are estimated as $16,000 per month, to be paid in the sume month as incurred. 10. On May 1, the company will sell its old equipment for $30,000 cash (old equipment will have a net book value of $40,000 at that date). The company will buy a new equipment for $24,000 cash on May 1. The company uses the straight-line method of depreciation with a useful life of 10 years. 11. The company has a bank loan outstanding which was taken in 2020, in order to start the businese. Principal payments of $10,000 and interest payments of $600 are paid every month. Required: Prepare the following budgets for MAY: a) Sales budget b) Schedule of expected cash collections from sales c) Inventory purchases budget d) Schedule of expected cash payments for inventory purchases e) Cash budget 1) Budgeted income statement PRESENT VALUE TABLES Table 1: Discount rate (r) Table 2: Present Value of an Annuity of $1 in Arrears
