Recent and forecastedsales:October$161,000February $413,000April $280,000$280,000DecemberNovember168,000January378,000March273,0001. Prepare a master budget including a budgeted income statement, balance sheet, cash budget,and supporting schedules for the months January-March 20X2.2. Explain why there is a need for a bank loan and what operating sources provide the cash for therepayment of the bank loan.CS Scanned with CamScanner Prepare Master BudgetFlying Fish Kite Company, a small Woy Woy, Australia, firm that sells kites on the Weh, wants a masterbudget for the 3 months beginning January 1, 20X2. It desires the ending minimum cash balance of$15,000 each month. Sales are forecasted at an average wholesale selling price of $14 per kite,Merchandise cost average $5 per kite. All sales are on credit, payable within 30 days, but experience hasshown that 40% of current sales are collected in the current month, 10% in the next month, and 50% inthe month thereafter. Bad debts are negligible.In January, Flying Fish Kite is beginning just-in-time (JIT) deliveries from suppliers, which meansthat purchases will equal expected sales. On January 1, purchases will cease until inventory decreases to$22,000, after which time purchases will equal sales. Purchases during any given month are paid in fullduring the following month.Monthly operating expenses are as follows:$80,000Wages and salariesInsurance expired450Depreciation900Miscellaneous4,000Rent$500/month + 5% of quarterly sales over $50,000Cash dividends of $2,400 are to be paid quarterly, beginning January 15, and are declared on thefifteenth of the previous month. All operating expenses are paid as incurred, except insurance,depreciation, and rent. Rent of $500 is paid at the beginning of each month, and the additional 5% ofsales is settled quarterly on the tenth of the month following the end of the quarter. The next rentsettlement date is January 10.The company plans to buy some new fixtures for $4,000 cash in March.Money can be borrowed and repaid in multiples of $2,000. Management wants to minimizeborrowing and repay rapidly. Simple interest of 9% per annum is computed monthly but paid when theprincipal is repaid. Assume that borrowing occurs at the beginning, and repayments at the end, of themonths in question. Compute interest to the nearest dollar.Assests as ofLiabilities and Owners' Equities asof December 31, 20X1December 31, 20X1Cash$30,000 Accounts payable (merchandise)$151,500Accounts receivable180,600Inventory*Unexpired insuranceFixed assets, net153,000 Dividends payable2,4005,400 Rent payable62,000 Owners' equity$431,00027,950249,150$431,000*November 30 inventory balance $59,000CS Scanned with CamScanner

A budget is a forecast of revenue and expenses for a certain future period of time that is generally…

Recent and forecasted sales: October $280,000 December $161,000 February $413,000 April $280,000 November 168,000 January 378,000 March 273,000 1. Prepare a master budget including a budgeted income statement, balance sheet, cash budget, and supporting schedules for the months January-March 20X2. 2. Explain why there is a need for a bank loan and what operating sources provide the cash for the repayment of the bank loan.

Recent and forecasted sales: October $280,000 December $161,000 February $413,000 April $280,000 November 168,000 January 378,000 March 273,000 1. Prepare a master budget including a budgeted income statement, balance sheet, cash budget, and supporting schedules for the months January-March 20X2. 2. Explain why there is a need for a bank loan and what operating sources provide the cash for the repayment of the bank loan.

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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