READ CAREFULLY! PART 1 ARE ONLY THE FACTS AND DATA YOU NEED TO MAKE THE ASSIGNMENT IN PART 2!

THE ASSIGNMENT ITSELF IS PART 2!!!!!

GOT IT?? OK!

PART 1

JKL Corporation is in the trading business and is drawing up its master budget for the next quarter of operations from April to June 20xx. The data collected and necessary to work with such a budget are the following:

A. Certain data from the Balance Sheet as of March 31, 20xx:

	Dr.	Cr.
Cash	$20,000
Accounts receivable	$64,000
Inventory	$15,400
Buildings and equipment (net of depreciation)	$225,000
Accounts Payable		$23,400
Long-term debt		$90,000
Common shares - equity		$150,000
Retained earnings		$61,000
Totals	$324,400	$324,400

B. Expected (projected) and actual sales for various months of 20xx are:

March (real)	$80,000
April	$80,100
May	$72,000
June	$84,800
July	$64,900

C. Other important information:

1- Monthly sales are 20% in cash and 80% on credit. Credit sales for the previous month are fully collected in the following month (so what is in accounts receivable at the end of March is 80% of March sales). 2- The gross profit margin generated by the corporation on its sales is 38%. 3- The ending inventory of each month is equal to 25% of the budgeted cost of sales for the next month. 4- 40% of monthly merchandise purchases are paid in the month of purchase and the remainder in the month following the purchase. 5- The expected monthly expenses are: salaries, $ 9,800; advertising, $ 6,200 per month and remaining expenses (except depreciation) represent 10% of sales. Assume that these expenses are paid every month (nothing is owed at the end of the month). 6- The depreciation expense is $ 10,000 for the quarter and includes the portion that corresponds to the assets acquired during the period. 7- Cash equipment was acquired: $ 25,000 in April and $ 20,000 in May 20xx. 8- Management wishes to maintain a minimum cash balance at the end of each month of $ 8,000. 9- When the company is in need of money, it can borrow from a local bank in increments of $ 1,000 at the beginning of each month up to a loan ceiling of $ 20,000. The interest rate that the bank charges on these loans is 1% per month and the interest is paid next month (we assume that it is not compound interest and that each loan is made at the end of the month)..

10 - The company paid dividends of $ 4,600 in June.

Receipts from sales for the quarter

	Sales (x 0.20)	Collections (x 0.80)	Total
April	May	June
March	$80,000.00	($80,000.00 x 0.20 = $16,000.00) ($80,000.00 - $16,000.00) ($80,000.00 x 0.80) = $64,000.00			$64,000.00
April	$80,100.00	($80,100.00 x 0.20) = $16,020.00	($80,100.00 - $16,020.00) ($80,100.00 x 0.80)= $64,080.00		$80,100.00
May	$72,000.00		($72,000.00 x 0.20) = $14,400.00	($72,000.00 - $14,400.00) ($72,000.00 x 0.80) = $57,600.00	$72,000.00
June	$84,800.00			($84,800.00 x 0.20) = $16,960.00	$16,960.00
Total		$80,020.00	$78,480.00	$74,560.00	$233,060.00

Purchases for the quarter

	April	May	June	Total
Budgeted cost of sales	$49,662.00	$44,640.00	$52,576.00	$146,878.00
Expected ending inventory	($44,640.00 x 0.25) = $11,160.00	($52,576.00 x 0.25) = $13,144.00	$10,059.50	$10,059.50
Available for sale	($49,662.00 + $11,160.00) = $60,822.00	($44,640.00 + $13,144.00) = $57,784.00	$62,635.50	$156,937.50
Less: initial inventory	$15,400.00	$11,160.00	$13,144.00	$15,400.00
Expected purchases	($60,822.00 - $15,400.00) = $45,422.00	($57,784.00 - $11,160.00) = $46,624.00	$49,491.50	$141,537.50

Disbursements on purchases for the quarter

	Purchases	Disbursements	Total
April	May	June
March		$23,400.00			$23,400.00
April	$45,422.00	($45,422.00 x 0.40) = $18,168.80	($45,422.00 x 0.60) = $27,253.20		$45,422.00
May	$46,624.00		($46,624.00 x 0.40) = $18,649.60	($46,624.00 x 0.60) = $27,974.40	$46,624.00
June	$49,491.50			($49,491.50 x 0.40) = $19,796.60	$19,796.60
Totals	($23,400.00 + $18,168.80) = $41,568.80	($27,253.20 + $18,649.00) = $45,902.80	($27,974.40 + $19,796.60) = $47,771.00	$135,242.60

Disbursements of administrative and sales expenses for the quarter

	April	May	June	Total
Salaries	$9,800.00	$9,800.00	$9,800.00	$29,400.00
Advertising	$6,200.00	$6,200.00	$6,200.00	$18,600.00
Remaining expenses (10% of sales)	($80,100.00 x 0.10) = $8,010.00	($72,000.00 x 0.10) = $7,200.00	($84,800.00 x 0.10) = $8,480.00	$23,690.00
Total expenses paid	$24,010.00	$23,200.00	$24,480.00	$71,690.00

Cash budget

Cash budget for the quarter ended in June
	April	May	June	Total
Initial cash balance	$20,000.00	$9,441.20	$8,818.40	$38,259.60
Cash receipts	$80,020.00	$78,480.00	$74,560.00	$233,060.00
Cash available	$100,020.00	$87,921.20	$83,378.40	$271,319.60
Less disbursements:
Purchases	$41,568.80	$45,902.80	$47,771.20	$135,242.80
Administrative and sales expenses	$24,010.00	$23,200.00	$24,480.00	$71,690.00
Purchase of equipment	$25,000.00	$20,000.00	0	$45,000.00
Dividends	0	0	$4,600.00	$4,600.00
Disbursements totals	$90,578.80	$89,102.80	$76,851.20	$256,532.80
Cash excess (deficiency)	$9,441.20	($1,181.60)	$6,527.20	$14,786.80
Financing:
Loans	0	$10,000.00	$2,000.00	$12,000.00
Loan payments	0	0	0	0
Interests	0	0	$100.00	$100.00
Financing	0	$10,000.00	$1,900.00	$11,900.00
Cash ending balance	$9,441.20	($10,000.00 - $1,181.60) = $8,818.40	($6,527.20 + $1,900.00) = $8,427.20	$8,427.20

PART 2 - THIS IS THE PART YOU MUST DO!!!

Given all the information above:

Use the data provided and the budgets you prepared for JKL Corporation so that you can develop the following projected financial statements:

1. Pro-forma status as of June 30 of 20xx.

2. Pro-forma income and expense statement for the quarter ended June 30 of 20xx.

3. Pro-forma statement of cash flows for the quarter ended June 30 of 20xx.

4. Then complete the following table of financial analysis rates. Show the calculations to obtain each rate.

Ratios	June 20xx	Calculations/process
Current ratio
Acid-test ratio
Accounts receivable turn-over
Average collection period
Inventory turn-over
Average sales period
Debt-assets ratio
Debt-equity ratio
Times interest earned ratio (TIE)
Gross margin percentage
Net margin
ROI: return on investment