Question
Starting in 2023, the brand new Happy Feet Creative Dance School will offer ballet and creative dancing classes to children in Newark. The School's director
Starting in 2023, the brand new Happy Feet Creative Dance School will offer ballet and creative dancing classes to children in Newark. The School's director expects the school to earn $9,000 in student fees in January and $13,000 in February. In addition, the director expects to receive grant pledges of $2,500 per month from an anonymous donor to help defray the school's costs in the first two months. The director expects 65% of student fees to be paid immediately and the other 35% to be paid one month later, and she expects to receive both of the grant payments in mid-February. The dance instructors will be paid salaries and benefits totaling $6,000 in January and $5,000 in February. In light of the fact that the school is just getting off the ground, the teachers have agreed to be paid with a one-month lag for the first two months. Happy Feet must pay rent of $2,500 at the beginning of each month. The director plans to pay $4,600 cash for supplies in early January; she expects half of the supplies to be used in January and the other half to be used in February. She does not plan to buy any more supplies until March. The director plans to take out a loan of $8,200 on January 1 . The annual interest rate is 10% , compounded monthly; no principal is due until 2018 but interest is due monthly. The director will use the loan to last 10 years and to have no salvage value.
a) (13 points) Prepare a monthly operating budget for January and February. [Hint: you must show the two months separately. You do not need to provide a "total" column that combines the two months]
b) (18 points) Prepare a monthly cash budget for January and February. [Hint: you must show the two months separately. You do not need to provide a "total" column that combines the two months]
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