You are a coop student at Canada Fireworks and have been asked to prepare a cash budget for the month of April. The Balance Sheet for Canada Fireworks at March 31 is below. Balance Sheet March 31 Assets Cash $40,000 Accounts receivable 16,000 Inventory 69,100 Prepaid Insurance* 900 Property, Plant and Equipment (net) 10.900 Total Assets $136,900 $26,500 26.500 Liabilities Accounts payable Total liabilities Shareholders' Equity Common shares Retained earnings Total shareholders' equity Total Liabilities and Shareholders' Equity 50,000 60.400 110,400 $136.900 *The company prepaid $1,200 of insurance at the start of January. Prepaid insurance is amortized (expensed) monthly at $100 per month. It is the company's policy to maintain a minimum cash balance of $10,000 per month. Information items pertaining to April's operations: a) The company purchases an asset for $80,000 in cash. b) April sales are expected to be $84,000, 70% of which are cash sales. The longstanding pattern of collection for credit sales is 60% in the month of sale and 40% in the following month. c) April purchases for merchandise inventory was $25,000, of which $10,000 was for cash and the balance on credit. The pattern of payment for credit purchases of inventory is 30% in the month of purchase and 70% in the month following purchase. Merchandise is the only item that is purchased on account. d) All other payments are made in the month incurred. e) Selling and Administration expenses totaled $14,000 in April. These expenses consist of the following items: a. Depreciation expense (includes depreciation on new asset) 2,000 b. Insurance expense 100 c. CEO's salary 4,900 d. Admin salaries 7,000 f) Cost of goods sold is 65% of sales. g) Ignore income taxes or interest expense Required: 1) Calculate the ending balance that would appear on the April 30 balance sheet for prepaid insurance? |