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Required information Problem 13-63 & Problem 13-64 (Algo) (LO 13-5, 6, 7, 9) [The following information applies to the questions displayed below.] Jeremy Slacker

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Required information Problem 13-63 & Problem 13-64 (Algo) (LO 13-5, 6, 7, 9) [The following information applies to the questions displayed below.] Jeremy Slacker started the Del Fuego Surf Shop on January 1 after determining that business school classes conflicted with his preferred activity. He invested $102,940 in the shop-$66,940 of his own savings and $36,000 borrowed from an acquaintance. The loan is to be repaid in 5 years. Jeremy will pay the lender annual interest at a rate of 8 percent. Shortly after opening, Jeremy realized that he is not the best financial planner and has come to you for help. With some prodding, you are able to establish that Jeremy plans to sell only two models of surfboard, the Zuma and the Coronado, for at least the first year. Data on the boards are given as follows. Expected annual sales (units) Retail price (per unit) Purchase cost (per unit) Coronado Zuma 1,008 504 $ 460 380 $760 510 Additional information on the planned operations for the year includes the following. 1. Equipment costing $62,000 was purchased for cash when the store opened. The equipment will be depreciated over five years using straight-line depreciation. 2. Because of the fantastic weather in Del Fuego, Jeremy expects sales to occur uniformly over the year. Sales will be both for cash (60 percent) and on account (40 percent). Sales on account are assumed to be collected in two months. 3. Jeremy will maintain inventory equal to one-half of a month's sales. All boards will be purchased from the manufacturer on credit with payment made one month after purchase. 4. Annual cash selling, general, and administrative expenses are $18,128 fixed plus 10 percent of revenues. 5. Jeremy's tax rate is 40 percent.

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