Required: Its sales estimates for the next six months are:

Vacation packages sell for $$300$ each. Ten percent is payable when the holiday is booked, and the

remainder after two months.

Travel agents are paid a commission of $10\%$ of the price of the holiday one month after the

booking is made.

The cost of travel by train is $$50$ per holiday and a hotel is $$100$ per holiday. Trains and hotels must

be paid for in the month when the holidays are taken.

Other variable costs are $$20$ per holiday and are paid in the month of the holiday.

Administration costs, including depreciation of property, plant, and equipment of $$42,000,$ amount

to $$402,000$ for the six months. Administration costs can be spread evenly over the period.

Loan interest of $$10,000$ is payable on March $31,2011,$ and a loan repayment of $$20,000$ is due on

that date. For your calculations you should ignore any interest on the overdraft.

Accounts payable of $$180,000$ at September $30$ are to be paid in October.

A payment of $$50,000$ for equipment assets is to be made in March $2011.$

The railroad company and the hotel chain base their charges on Davis Travel's forecast

requirements and hold capacity to meet those requirements. If Davis is unable to fill this reserved

capacity, a charge of $50\%$ of the rates noted above is made on unused train seats and hotel rooms.

Required:

$($a$)$ Prepare:

$($i$)$ A projected cash budget for each of the six months ending March $31,2011.$

$($ii$)$ A pro forma income statement for the six months ended on that date.

$($iii$)$ A pro forma statement of retained earnings for the six months ended on March $31,2011.$

$($iv$)$ A pro forma balance sheet at March $31,2011.$

$($b$)$ Discuss the main financial problems confronting Davis Travel Ltd$.$

Ignore taxation in your calculations.

Prepare pro forma financial statements to two decimal places for the year ended December $31,2011.$

A$-3\mathrm{.}2$ Davis Travel Ltd$.$ specializes in winter sports holidays but also organizes outdoor activity holidays in

summer. You are given the following information: