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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(You really should do this assignment in excel, and link your cells) Kilo-cone is an ice-cream store that sells 1kg ice cream cones, and has the following information: Estimated monthly Sales (in cones) January to March: 45,000 per month 70.000 per month April to September: October to December: 20,000 per month Ice cream cones sell for $1 each from January 1st to March 31st, and $3 each during the rest of the year. Half of the sales are paid in cash, and the other half is on account. 80% of the sales on account are collected in the current month and the remaining 20% of credit sales are collected in the following month. Purchases and Inventory Each cone requires 1kg of ice cream and 1 cone. Ice cream cost $14 for a 10kg tub and cones cost $10 for a box of 100 cones. All purchases are made on credit. Half of the purchases are paid for in the month of the purchase, and the other half is paid in the following month. (For simplicity, assume that the inventory has the same proportion of cones and ice-cream on hand.) At the end of each month, they plan on having enough inventory on hand to cover 44 of the sales for the next month. Expenses and Disbursements Labour Salary costs are $48,000 for the year, or $4,000 per month. (For simplicity, assume that there are no salary accruals.) Fixed expenses are expected to be $2,500 per month (Rent of $1,000 and depreciation of $1,500). Rent is paid at the beginning of each month. The accounts payable at December 31 2022 was paid in full on January 31 2023. Dividends $340,000 of dividends are declared and paid on June 30th, and $260,000 of dividends are declared and paid on September 30th Line of Credit
Transcribed Image Text:(You really should do this assignment in excel, and link your cells) Kilo-cone is an ice-cream store that sells 1kg ice cream cones, and has the following information: Estimated monthly Sales (in cones) January to March: 45,000 per month 70.000 per month April to September: October to December: 20,000 per month Ice cream cones sell for $1 each from January 1st to March 31st, and $3 each during the rest of the year. Half of the sales are paid in cash, and the other half is on account. 80% of the sales on account are collected in the current month and the remaining 20% of credit sales are collected in the following month. Purchases and Inventory Each cone requires 1kg of ice cream and 1 cone. Ice cream cost $14 for a 10kg tub and cones cost $10 for a box of 100 cones. All purchases are made on credit. Half of the purchases are paid for in the month of the purchase, and the other half is paid in the following month. (For simplicity, assume that the inventory has the same proportion of cones and ice-cream on hand.) At the end of each month, they plan on having enough inventory on hand to cover 44 of the sales for the next month. Expenses and Disbursements Labour Salary costs are $48,000 for the year, or $4,000 per month. (For simplicity, assume that there are no salary accruals.) Fixed expenses are expected to be $2,500 per month (Rent of $1,000 and depreciation of $1,500). Rent is paid at the beginning of each month. The accounts payable at December 31 2022 was paid in full on January 31 2023. Dividends $340,000 of dividends are declared and paid on June 30th, and $260,000 of dividends are declared and paid on September 30th Line of Credit
The store has a line of credit that they can borrow from time to time. Funds are borrowed/repaid in increments of $10,000. Interest payments are on the 1st day of the following month. For example, interest for the period January 1st to January is due February 1st. Interest is 2% per month. Any extra cash is first used to pay off the line of credit in increments of $10,000. Assume that advances occur on the first day of each month, and repayments occur on the last day of each month. Cash At the end of each month, the minimum cash balance is $5,000. Beginning Balances at January 1, 2021 Cash Inventory Accounts Receivable. Equipment Accumulated Depreciation. Total Assets Accounts Payable Line of Credit Retained Earnings Total Liabilities and Equity $ 4,000 0 6,000 180,000 (70,000) 120,000 $22,000 0 98.000 120,000 REQUIRED: A. Prepare a cash flow schedule by that shows how much cash is on hand at the end of each month of 2023. Show all relevant calculations and supporting schedules by month. B. Prepare a balance sheet at December 31 2023. C. Prepare an income statement for the year ending December 31 2023.
Transcribed Image Text:The store has a line of credit that they can borrow from time to time. Funds are borrowed/repaid in increments of $10,000. Interest payments are on the 1st day of the following month. For example, interest for the period January 1st to January is due February 1st. Interest is 2% per month. Any extra cash is first used to pay off the line of credit in increments of $10,000. Assume that advances occur on the first day of each month, and repayments occur on the last day of each month. Cash At the end of each month, the minimum cash balance is $5,000. Beginning Balances at January 1, 2021 Cash Inventory Accounts Receivable. Equipment Accumulated Depreciation. Total Assets Accounts Payable Line of Credit Retained Earnings Total Liabilities and Equity $ 4,000 0 6,000 180,000 (70,000) 120,000 $22,000 0 98.000 120,000 REQUIRED: A. Prepare a cash flow schedule by that shows how much cash is on hand at the end of each month of 2023. Show all relevant calculations and supporting schedules by month. B. Prepare a balance sheet at December 31 2023. C. Prepare an income statement for the year ending December 31 2023.
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