Yanimize company sales in December 2018 were $70,000 and they are expected to rise by $4,500 per month for the next 5 months. Of sales, 80 per cent are collected during the month of sale and the rest two months after sales. The cost of sales is 60 per cent of sales and, the company plans to keep an inventory at the end of each month equal to forty per cent of the anticipated sales for the next month’s sales. Suppliers are paid one month after purchases are made. Monthly wages amount to $4,000, rent and heating $700 and depreciation $600. A machine is to be bought in March for $5,000 paid in cash. The purchase of the machine means that the monthly change for depreciation will increase by $40. The inventory held at January 1st is $14,400. Required: Calculate the estimated cash collection from sales for February and March. Calculate the purchases for February and March.  Assuming that the cash balance at 31/01/2019 is $8,000; prepare a cash budget for the two months ending March 31, 2019. Discuss whether the company will be able to repay a loan of $60,000 at the end of March.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Yanimize company sales in December 2018 were $70,000 and they are expected to rise by $4,500 per month for the next 5 months. Of sales, 80 per cent are collected during the month of sale and the rest two months after sales. The cost of sales is 60 per cent of sales and, the company plans to keep an inventory at the end of each month equal to forty per cent of the anticipated sales for the next month’s sales. Suppliers are paid one month after purchases are made. Monthly wages amount to $4,000, rent and heating $700 and depreciation $600. A machine is to be bought in March for $5,000 paid in cash. The purchase of the machine means that the monthly change for depreciation will increase by $40. The inventory held at January 1st is $14,400.

Required:

    1. Calculate the estimated cash collection from sales for February and March.
    2. Calculate the purchases for February and March. 
    3. Assuming that the cash balance at 31/01/2019 is $8,000; prepare a cash budget for the two months ending March 31, 2019.
    4. Discuss whether the company will be able to repay a loan of $60,000 at the end of March.

I want the solution of this exercise from number 1 to number 4 i want all the questions solved in details please.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Income Statement Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education