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The Urban Dance Company (UDC) is a not-for-profit organization that puts on dance performances and offers dance courses. As UDC's financial manager, you are preparing
The Urban Dance Company (UDC) is a not-for-profit organization that puts on dance performances and offers dance courses. As UDC's financial manager, you are preparing for the upcoming fiscal year 2021, which will begin on July 1.
- You expect to begin FY21 with $55,000 in cash on hand.
- On July 1, UDC:
- Will purchase a furnished building which will house its performance and administrative offices for $2,000,000 by taking out a 40-year loan.
- The terms of the loan require:
- an annual interest payment of 3% of the outstanding balance on the first day of each fiscal year, and
- an annual principal repayment of $50,000 on the last day of each fiscal year.
- The building has a useful life of 40 years and no salvage value. UDC uses the straight-line depreciation method.
- Equipment bought in previous fiscal years will depreciate by $30,000 in FY21.
- UDC's staff will earn salaries equal to $100,000 per month (up from $95,000 per month in FY20) and
- Utilities will total $4,500 per month (up from $4,300 per month in FY20).
- Both salaries and utilities are paid with a one-month lag.
- Costumes will cost $100,000 in FY21. The expense for costumes will be incurred evenly throughout the year and paid in a timely fashion.
- The annual insurance premium of $20,000 is due on the first day of the fiscal year.
- UDC earns revenue from its dance courses. UDC:
- Offers one course each quarter (beginning July 1, October 1, January 1, and April 1 of each fiscal year).
- 100 students enroll each quarter.
- Charges tuition of $2,500 per student.
- Requires students to submit payment one week before the course begins.
- Has not raised its course fee in several years, but plans to raise the fee by 10% for courses that begin on or after July 1, 2021.
- Expects the number of students to remain unchanged despite the price increase.
- UDC:
- Will earn an estimated $700,000 in individual contributions in FY21;
- Expects to collect 40% of these contributions in the first half of the fiscal year and 60% in the second half.
Use the above information to prepare an annual operating budget and semiannual cash budget for UDC for FY21.
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