[Tenny Hajane]

sales 20% for cash and 80% for credit. Company gross margin is 40% of sales.(in other words,cost of goods sold is 60% of sales. Monthly expenses are: salaries and wedges,$27,000 per month, advertising $70,000 per month,shipping 5% of sales. Other expenses 3% of sales. Depreciation will be $42,000 during the quarter. Each month ending inventory is 25% of the following month cost of goods sold. Inventory is paid for in the month of purchase, the other half is paid in the following month. During February the company will purchase machine for $1,700 cash, March will purchase equipment for $84,500. During January the company will pay $45,000 in cash dividends. Company must maintain minimum cash balance of $30,000. Credit is available at a bank for borrowing that may be needed during the quarter. All borrowing is done at the begginning of the month and all repayments made at the end of the month. Borrowings and repayments of principal must be in $1,000. Interest is paid only at the payments of principal. The annual interest rate is 12%.(figure interest on whole months,e.g,1/12, 2/12.
As of December 31st the company account balances:

Debits Credits
Cash $48,000
Accounts receivable $224,000
Inventory 60,000
Building&equipment 370,000
Accounts payable $93,000
Capital stock 500,000
Retained earnings 109,000
$702,000 $702,000

Actual sales for December and budgeted sales for 4 months:
December actual $280,000
January $400,000
February $600,000
March $300,000
April $200,000


QUESTIONS ASKED BASED ON THE ABOVE DATA:

COMPLETE THE FOLLOWING STATEMENTS AND SCHEDULES FOR THE 1ST QUARTER:


Jan Feb Mar Quarter
1.
Cash sales $80,000
Credit sales 224,000
Total cash collections $304,000

2a. Merchandise purchases budget:

Jan Feb Mar Quarter

Budgeted cost of goods sold $240,000 $360,000
Add desired ending inventory 90,000
Total needs 330,000
Less beginning inventory 60,000
Required purchases $270,000
$400,000 sales *60% cost ratio=$240,000.
$360,000*25%=$90,000

2b. SCHEDULE OF EXPECTED CASH DISBURSEMENT FOR SELLING AND ADMIN EXPENSES:

Jan Feb Mar Quarter

December purchases $93,000 $93,000
January purchases $135,000 $135,000 270,000

Feb purchases
March purchases
Total cash disbursement
forpurchases $228,000

[Curlyben]

Please refer to THIS ANNOUNCEMENT