Requirement 2. Explain why there is a need for a bank loan and what operating sources supply cash for repaying the bank loan. The need for such a short-term, self-liquidating loans often arise because: O A. start-up businesses and/or businesses with a heavy focus on research and development require outside funding to sustain ongoing operations. O B. of the seasonal nature of a business. The basic source of cash is proceeds from sales to customers. In times of peak sales, there is a lag between the sale and the collection of the cash, yet the payroll and suppliers must be paid in cash right away. When the cash is collected, it in turn may be used to repay the loan O C. the amount of the loan and the timing of the repayment are heavily dependent on the credit terms that pertain to both the purchasing and selling functions of the business. OD. Both b and c. 1: Data Table Cash $ Inventory Accounts receivable 12.200 Recent and Projected Sales 163,200 April $ 100.000 117,000 May 110.000 45.000 June 240,000 Net furniture and fixtures $ Total assets 110,000 Accounts payable S 337,400 July 173,200 August 164,200 September 140.000 Owners' equity 90,000 Total liabilities $ 337,400 and owners' equities 2: More Info Credit sales are 90% of total sales. Eighty percent of each credit account is collected in the month following the sale and the remaining 20% is collected in the subsequent month. Assume that bad debts are negligible and can be ignored. The accounts receivable on May 31 are the result of the credit sales for April and May: (0.20 x 0.90 x $100,000) + (1.0 x 0.90 x $110,000) = $117,000. The policy is to acquire enough inventory each month to equal the following month's projected cost of goods sold. All purchases are paid for in the month following purchase. The average gross profit on sales is 32%. Salaries, wages, and commissions average 18% of sales; all other variable expenses are 5% of sales. Fixed expenses for rent, property taxes, and miscellaneous payroll and other items are $4.000 monthly. Assume that these variable and fixed expenses require cash disbursements each month. Depreciation is $700 monthly In June, $10,000 is going to be disbursed for fixtures acquired and recorded in furniture and fixtures in May. The May 31 balance of accounts payable includes this amount. Assume that a minimum cash balance of $10,000 is to be maintained. Also assume that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is compounded and added to the outstanding balance each month, but interest is paid only at the ends of months when principal is repaid. The interest rate is 8% per annum, round interest computations and interest payments to the nearest dollar. Interest payments may be any dollar amount, but all borrowing and repayments of principal are made in multiples of $1,000. 3: Requirements 1. Prepare a budgeted income statement for the coming June-August quarter, a cash budget for each of the next 3 months, and a budgeted balance sheet for August 31, 20X8. All operations are evaluated on a before-income tax basis, so income taxes may be ignored here. 2. Explain why there is a need for a bank loan and what operating sources supply cash for repaying the bank loan. 1 You are the new manager of the local Real Time Electronics store. Top management of Real Time Electronics is convinced that management training should include the active participation of store managers in the budgeting process. You have been asked to prepare a complete master budget for your store for June, July, and August. All accounting is done centrally so you have no expert help on the premises. In addition, tomorrow the branch manager and the assistant controller will be here to examine your work; at that time, they will assist you in formulating the final budget document. The idea is to have you prepare the initial budget on your own so that you gain more confidence about accounting matters. You want to make a favorable impression on your superiors, so you gather the following financial statement and sales data as of May 31, 20X8: (Click the icon to view the data.) ?(Click the icon to view the additional information.) Read the requirements Requirement 1. Prepare a budgeted income statement for the coming June through August quarter, a cash budget for each of the next three months, and a budgeted balance sheet for August 31, 20X8. All operations are evaluated on a before-income tax basis, so income taxes may be ignored here. Before we prepared the budgeted income statements, cash budgets, and budgeted balance sheet, let's prepare a sales budget, a schedule of cash collections from customers, a purchases budget, a schedule of cash disbursements for purchases, and a schedule of operating expenses and disbursements for expenses (except interest.) Begin by preparing the sales budget for the June through August quarter. Schedule a: Sales budget June July August Credit sales Cash sales Total sales Now prepare a schedule of cash collections from customers. Schedule b: Cash collections from customers June July August For current month sales For sales from 1 month prior For sales from 2 months prior Total collections from customers Next, prepare a schedule showing the budgeted monthly purchases for May through August Schedule c: Purchases budget May June July August Desired purchases Prepare schedule of cash disbursements for purchases. Schedule d: Cash disbursements for purchases June July August Last month's purchases Prepare a budgeted monthly income statement for the coming June through August and for the quarter in total. (Complete all answer boxes. Use a minus sign or parentheses for a loss.) Real Time Electronics Budgeted Income Statements For the Three Months Ending August 31, 20X8 June - August Total June July August Sales Cost of goods sold Gross profit Operating expenses Salaries, wages, commissions Rent, taxes and other fixed expenses Other variable operating expenses Depreciation Total operating expenses Income (loss) from operations Interest expense Net income (loss) Prepare a budgeted balance sheet for August 31, 20X8. Real Time Electronics Budgeted Balance Sheet August 31, 20x8 Assets Current assets Cash Liabilities and Owners' Equity Current liabilities Accounts payable Note payable Accounts receivable Merchandise inventory Total current liabilities Total current assets Net furniture and fixtures Owners' equity Total assets Total liabilities and owners' equity Requirement 2. Explain why there is a need for a bank loan and what operating sources supply cash for repaying the bank loan. The need for such a short-term, self-liquidating loans often arise because: O A. start-up businesses and/or businesses with a heavy focus on research and development require outside funding to sustain ongoing operations. O B. of the seasonal nature of a business. The basic source of cash is proceeds from sales to customers. In times of peak sales, there is a lag between the sale and the collection of the cash, yet the payroll and suppliers must be paid in cash right away. When the cash is collected, it in turn may be used to repay the loan O C. the amount of the loan and the timing of the repayment are heavily dependent on the credit terms that pertain to both the purchasing and selling functions of the business. OD. Both b and c. 1: Data Table Cash $ Inventory Accounts receivable 12.200 Recent and Projected Sales 163,200 April $ 100.000 117,000 May 110.000 45.000 June 240,000 Net furniture and fixtures $ Total assets 110,000 Accounts payable S 337,400 July 173,200 August 164,200 September 140.000 Owners' equity 90,000 Total liabilities $ 337,400 and owners' equities 2: More Info Credit sales are 90% of total sales. Eighty percent of each credit account is collected in the month following the sale and the remaining 20% is collected in the subsequent month. Assume that bad debts are negligible and can be ignored. The accounts receivable on May 31 are the result of the credit sales for April and May: (0.20 x 0.90 x $100,000) + (1.0 x 0.90 x $110,000) = $117,000. The policy is to acquire enough inventory each month to equal the following month's projected cost of goods sold. All purchases are paid for in the month following purchase. The average gross profit on sales is 32%. Salaries, wages, and commissions average 18% of sales; all other variable expenses are 5% of sales. Fixed expenses for rent, property taxes, and miscellaneous payroll and other items are $4.000 monthly. Assume that these variable and fixed expenses require cash disbursements each month. Depreciation is $700 monthly In June, $10,000 is going to be disbursed for fixtures acquired and recorded in furniture and fixtures in May. The May 31 balance of accounts payable includes this amount. Assume that a minimum cash balance of $10,000 is to be maintained. Also assume that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is compounded and added to the outstanding balance each month, but interest is paid only at the ends of months when principal is repaid. The interest rate is 8% per annum, round interest computations and interest payments to the nearest dollar. Interest payments may be any dollar amount, but all borrowing and repayments of principal are made in multiples of $1,000. 3: Requirements 1. Prepare a budgeted income statement for the coming June-August quarter, a cash budget for each of the next 3 months, and a budgeted balance sheet for August 31, 20X8. All operations are evaluated on a before-income tax basis, so income taxes may be ignored here. 2. Explain why there is a need for a bank loan and what operating sources supply cash for repaying the bank loan. 1 You are the new manager of the local Real Time Electronics store. Top management of Real Time Electronics is convinced that management training should include the active participation of store managers in the budgeting process. You have been asked to prepare a complete master budget for your store for June, July, and August. All accounting is done centrally so you have no expert help on the premises. In addition, tomorrow the branch manager and the assistant controller will be here to examine your work; at that time, they will assist you in formulating the final budget document. The idea is to have you prepare the initial budget on your own so that you gain more confidence about accounting matters. You want to make a favorable impression on your superiors, so you gather the following financial statement and sales data as of May 31, 20X8: (Click the icon to view the data.) ?(Click the icon to view the additional information.) Read the requirements Requirement 1. Prepare a budgeted income statement for the coming June through August quarter, a cash budget for each of the next three months, and a budgeted balance sheet for August 31, 20X8. All operations are evaluated on a before-income tax basis, so income taxes may be ignored here. Before we prepared the budgeted income statements, cash budgets, and budgeted balance sheet, let's prepare a sales budget, a schedule of cash collections from customers, a purchases budget, a schedule of cash disbursements for purchases, and a schedule of operating expenses and disbursements for expenses (except interest.) Begin by preparing the sales budget for the June through August quarter. Schedule a: Sales budget June July August Credit sales Cash sales Total sales Now prepare a schedule of cash collections from customers. Schedule b: Cash collections from customers June July August For current month sales For sales from 1 month prior For sales from 2 months prior Total collections from customers Next, prepare a schedule showing the budgeted monthly purchases for May through August Schedule c: Purchases budget May June July August Desired purchases Prepare schedule of cash disbursements for purchases. Schedule d: Cash disbursements for purchases June July August Last month's purchases Prepare a budgeted monthly income statement for the coming June through August and for the quarter in total. (Complete all answer boxes. Use a minus sign or parentheses for a loss.) Real Time Electronics Budgeted Income Statements For the Three Months Ending August 31, 20X8 June - August Total June July August Sales Cost of goods sold Gross profit Operating expenses Salaries, wages, commissions Rent, taxes and other fixed expenses Other variable operating expenses Depreciation Total operating expenses Income (loss) from operations Interest expense Net income (loss) Prepare a budgeted balance sheet for August 31, 20X8. Real Time Electronics Budgeted Balance Sheet August 31, 20x8 Assets Current assets Cash Liabilities and Owners' Equity Current liabilities Accounts payable Note payable Accounts receivable Merchandise inventory Total current liabilities Total current assets Net furniture and fixtures Owners' equity Total assets Total liabilities and owners' equity